[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2003 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



                    7


          Parts 1900 to 1939

                         Revised as of January 1, 2003

Agriculture





          Containing a codification of documents of general 
          applicability and future effect
          As of January 1, 2003
          With Ancillaries
          Published by:
          Office of the Federal Register
          National Archives and Records
          Administration

A Special Edition of the Federal Register



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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003



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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 7:
    Subtitle B--Regulations of the Department of Agriculture 
      (Continued)
          Chapter XVIII--Rural Housing Service, Rural 
          Business- Cooperative Service, Rural Utilities 
          Service, and Farm Service Agency, Department of 
          Agriculture (Continued)                                    5
  Finding Aids:
      Table of CFR Titles and Chapters........................     343
      Alphabetical List of Agencies Appearing in the CFR......     361
      List of CFR Sections Affected...........................     371



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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 7 CFR 1900.1 refers 
                       to title 7, part 1900, 
                       section 1.

                     ----------------------------

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
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parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
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[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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[[Page vii]]

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

January 1, 2003.



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                               THIS TITLE

    Title 7--Agriculture is composed of fifteen volumes. The parts in 
these volumes are arranged in the following order: parts 1-26, 27-52, 
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end. 
The contents of these volumes represent all current regulations codified 
under this title of the CFR as of January 1, 2003.

    The Food and Nutrition Service current regulations in the volume 
containing parts 210-299, include the Child Nutrition Programs and the 
Food Stamp Program. The regulations of the Federal Crop Insurance 
Corporation are found in the volume containing parts 400-699.

    All marketing agreements and orders for fruits, vegetables and nuts 
appear in the one volume containing parts 900-999. All marketing 
agreements and orders for milk appear in the volume containing parts 
1000-1199. Part 900--General Regulations is carried as a note in the 
volume containing parts 1000-1199, as a convenience to the user.

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[[Page 1]]



                          TITLE 7--AGRICULTURE




                 (This book contains parts 1900 to 1939)

  --------------------------------------------------------------------

  SUBTITLE B--Regulations of the Department of Agriculture (Continued)

                                                                    Part

chapter xviii--Rural Housing Service, Rural Business-
  Cooperative Service, Rural Utilities Service, and Farm 
  Service Agency, Department of Agriculture (Continued).....        1900

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  Subtitle B--Regulations of the Department of Agriculture (Continued)

[[Page 5]]



    CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE 
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF 
                         AGRICULTURE (CONTINUED)




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter XVIII appear at 59 FR 
66443, Dec. 27, 1994, 61 FR 1109, Jan. 16, 1996, and 61 FR 2899, Jan. 
30, 1996.

                    SUBCHAPTER H--PROGRAM REGULATIONS
Part                                                                Page
1900            General.....................................           7
1901            Program-related instructions................          19
1902            Supervised bank accounts....................          57
1904

Loan and grant programs (individual) [Reserved]

1910            General.....................................          69
1922            [Reserved]

1924            Construction and repair.....................          82
1925            Taxes.......................................         184
1927            Title clearance and loan closing............         186
1930            General.....................................         196
1931-1939       [Reserved]

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                    SUBCHAPTER H--PROGRAM REGULATIONS





PART 1900--GENERAL--Table of Contents




                   Subpart A--Delegations of Authority

Sec.
1900.1  General.
1900.2  National office staff and state directors.
1900.3  State, district, and county office employees.
1900.4  Ratification.
1900.5  Assignment of cases.
1900.6  Chair, Loan Resolution Task Force.
1900.7  Effect on other regulations.

         Subpart B--Adverse Decisions and Administrative Appeals

1900.51  Definitions.
1900.52  General.
1900.53  Applicability.
1900.54  Effect on assistance pending appeal.
1900.55  Adverse action procedures.
1900.56  Non-appealable decisions.
1900.57  [Reserved]

Exhibit A to Subpart B [Reserved]
Exhibit B-1 to Subpart B--Letter for Notifying Applicants, Lender, 
          Holders and Borrowers of Adverse Decisions Where the Decision 
          Is Appealable
Exhibit B-2 to Subpart B--Letter for Notifying Applicants, Lenders and 
          Holders and Borrowers of Unfavorable Decision Reached at the 
          Meeting
Exhibit B-3 to Subpart B--Letter for Notifying Applicants, Lender, 
          Holders and Borrowers of Adverse Decisions Where the Decision 
          Involves an Appraisal (Not To Be Used in Cases Involving 
          Farmer Program Primary Loan Servicing Actions)
Exhibit B-4 to Subpart B--Letter for Notifying Applicants, Lenders and 
          Holders and Borrowers of Unfavorable Decision Reached After 
          State Director Review of an Appraisal (Not To Be Used in Cases 
          Involving Farmer Program Primary Loan Servicing Actions)
Exhibit C to Subpart B--Letter for Notifying Applicants, Lenders, 
          Holders, and Borrowers of Adverse Decisions When Part or All 
          of the Decision Is Not Appealable [Not Used in Connection With 
          Decisions Related to Nonprogram Applicants, Borrowers, or 
          Property]
Exhibit D to Subpart B--Hearings/Review Officer Designations

                 Subpart C--Applicability of Federal Law

1900.101  General
1900.102  Applicable law.

 Subpart D--Processing and Servicing FmHA or Its Successor Agency Under 
  Public Law 103-354 Assistance to Employees, Relatives, and Associates

1900.151  General.
1900.152  Definitions.
1900.153  Identifying and reporting an employee relationship.
1900.154  Determining the need for special handling.
1900.155  Designating the processing/servicing official.
1900.156  Special handling-processing.
1900.157-1900.200  [Reserved]

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 7 U.S.C. 6991, et. seq.; 42 
U.S.C. 1480; Reorganization Plan No. 2 of 1953 (5 U.S.C. App.).



                   Subpart A--Delegations of Authority



Sec. 1900.1  General.

    The authorities contained in this subpart apply to all assets, 
functions, and programs now or hereafter administered or serviced by the 
Farmers Home Administration or its successor agency under Public Law 
103-354, including but not limited to those relating to indebtedness, 
security, and other assets obtained or contracted through the Secretary 
of Agriculture, Resettlement Administration, Farm Security 
Administration, or Emergency Crop and Feed Loan Offices of the Farm 
Credit Administration, the Soil Conservation Service in connection with 
water conservation and utilization projects; the Puerto Rico Hurricane 
Relief Commission and successor agencies in connection with Puerto Rico 
Hurricane relief loans to individuals; State Rural Rehabilitation 
Corporations, the United States of America or its officials as trustees 
of the assets of State Rural Rehabilitation Corporations, Regional 
Agricultural Credit Corporations, Defense Relocation Corporations, land 
leasing and purchasing associations, corporations, and agencies, and 
whether the interest of the

[[Page 8]]

United States in the indebtedness, instrument of debt, security, 
security instrument, or other assets is that of obligee, owner, holder, 
insurer, assignee, mortgagee, beneficiary, trustee or other interest.

[44 FR 18162, Mar. 27, 1979]



Sec. 1900.2  National office staff and state directors.

    The following officials of the Farmers Home Administration or its 
successor agency under Public Law 103-354, in accordance with applicable 
laws, and the regulations implementing these laws, are severally 
authorized, for and on behalf of and in the name of the United States of 
America or the Farmers Home Administration or its successor agency under 
Public Law 103-354, to do and perform all acts necessary in connection 
with making and insuring loans, making grants and advances, servicing 
loans and other indebtedness and obtaining, servicing and enforcing 
security and other instruments related thereto: The Deputy Administrator 
Program Operations, the Assistant Administrators for Farmer Programs, 
Housing, and Community and Business Programs, the Assistant 
Administrator Accounting and Director Finance Office; each Director and 
the Insured Loan Officer, Finance Office; the Directors for the Water 
and Waste Disposal Division, the Community Facilities Division, the 
Business and Industry Division, the Multi-Family Housing Processing 
Division, the Multi-Family Housing Servicing and Property Management 
Division, the Single Family Housing Processing Division, the Single 
Family Housing Servicing and Property Management Division, the Farm Real 
Estate and Production Division, the Emergency Division; and each State 
Director within the area of that State Director's jurisdiction; and in 
the absence or disability of any such official, the person acting in 
that official's position; and the delegates of any such official. The 
authority includes, but is not limited to, the authority to:
    (a) Effect the assignment of, or the declaration of trust with 
respect to, insured security instruments to place them in trust with the 
United States of America as trustee for the benefit of any holder of the 
promissory note or bond secured by such security instrument.
    (b) Acknowledge receipt of notice of sale or assignment of insured 
loans and security instruments.
    (c) Appoint or request the appointment of substitute trustees in 
deeds of trust.
    (d) Execute proofs of claim in bankruptcy, death, and other cases.
    (e) Consent to sale or assignment of, or sell or assign, direct or 
insured loans and security instruments (except that in the case of 
Agency asset sales, District Directors and County Supervisors are 
delegated the authority to assign security instruments), endorsements, 
reinsurance agreements, or other instruments in connection therewith; 
and execute agreements to insure and reinsure, and to purchase and 
repurchase insured loans and security instruments.
    (f) Compromise, adjust, cancel or charge off indebtedness (except 
that County Supervisors are delegated authority to approve all 
settlements of sections 502 and 504 single family housing debt(s)).
    (g) Modify contracts and other instruments and compromise claims 
owed to the Farmers Home Administration or its successor agency under 
Public Law 103-354 and covered by the Federal Claims Collection Act of 
1966 and the joint regulations issued under it by the Attorney General 
and the Comptroller General as provided for in applicable program 
regulations.
    (h) Perform all actions pertaining to the sale (or other disposal) 
of real or chattel property or interests therein and to execute and 
deliver bills of sale or other instruments to effect such sale (or 
disposition), which includes but is not limited to offering property for 
sale; advertising; receiving and accepting offers or bids; and closing 
sale transactions, including the collection of sale proceeds, and 
delivery of quitclaim deeds, easements, and right-of-way conveyances 
after those documents have been executed. The authority to execute any 
deeds of conveyance of inventory real property, including quitclaim 
deeds, easements, rights-of-

[[Page 9]]

way, or sale of any use rights is reserved to the State Director, and 
this authority may not be redelegated.
    (i) Approve and consent to transfers of security property to other 
parties with or without assumption of debts; and approve and accept 
transfers of security property or interests therein to the United States 
of America, and execute release from liability after determination is 
made in accordance with applicable program regulations.
    (j) Execute and deliver, or approve in writing, suspensions, 
releases or terminations of assignments, of income, renewals, 
extensions, partial and full releases and satisfactions of security, and 
personal or indemnity liability for indebtedness, waivers, subordination 
agreements, severance agreements, affidavits, acknowlegements, 
certificates of residence, evidence of consent, and other instruments or 
documents.
    (k) Accelerate and declare entire real estate or chattel 
indebtedness due and payable, foreclose or request foreclosure of real 
estate security instruments by exercise of power of sale or otherwise, 
and bid for and purchase at any foreclosure or other sale or otherwise 
acquire real property pledged, mortgaged, conveyed, attached, or levied 
upon to collect indetedness, and accept title to any property so 
purchased or acquired.
    (l) Require and accept further or additional security.
    (m) Accelerate and declare entire non-real estate indebtedness due 
and payable, and foreclose or request foreclosure of chattel security 
instruments by exercise of power of sale or otherwise.
    (n) Bid for and purchase at any foreclosure or other sale, or 
otherwise acquire personal property pledged, mortgaged, conveyed, 
attached, or levied upon to collect indebtedness, and accept title to 
any property so purchased or acquired.
    (o) Take possession of, maintain, and operate security or acquired 
real or personal property or interests therein, sell or otherwise 
dispose of such personal property, and execute and deliver contracts, 
caretaker's agreements, leases, and other instruments in connection 
therewith, as appropriate.
    (p) Execute proofs of loss on insurance contracts and endorse 
without recourse loss payment drafts and checks.
    (q) Issue, publish and serve notices and other instruments.
    (r) File or record instruments, whether separate instruments, or by 
making marginal entries, or by use of other methods permissible under 
State law.

[44 FR 18162, Mar. 27, 1979, as amended at 47 FR 5700, Feb. 8, 1982; 50 
FR 23901, June 7, 1985; 52 FR 44375, Nov. 19, 1987; 56 FR 6946, Feb. 21, 
1991]



Sec. 1900.3  State, district, and county office employees.

    The following officials and employees of the Farmers Home 
Administration or its successor agency under Public Law 103-354, in 
accordance with applicable laws, and the regulations implementing these 
laws, for and on behalf of, and in the name of the United States of 
America or the Farmers Home Administration or its successor agency under 
Public Law 103-354, are also severally authorized within the area of 
their respective jurisdictions to perform the acts specified in 
paragraphs (g) through (r) of Sec. 1900.2; and within their loan 
approval authority to sell or otherwise dispose of real or chattel 
property or interests therein and to execute and deliver bills of sale 
or other instruments to effect such sale or disposition: Chief, Farmer 
Programs/Specialist; Chief, Rural Housing/Specialist; Chief, Community 
Programs/Specialist; Chief, Business and Industry/Specialist; Chief, 
Community and Business Programs/Specialist; Chief, Appraisal Staff/
Appraiser; Chief, Underwriting Staff/Underwriter; Chief, Underwriting 
and Appraisal Staff; Chief, Servicing and Inventory Staff/Credit 
Management Specialist/Realty Specialist; each District Director, 
Assistant District Director, Loan Specialist General, County (including 
Parish) Supervisor, Emergency Loan Supervisor, Assistant Emergency Loan 
Supervisor, or other supervisor or assistant supervisor, and in the 
absence or disability of any such official or employee, the person 
acting in the position.

[50 FR 23902, June 7, 1985, as amended at 55 FR 43325, Oct. 29, 1990]

[[Page 10]]



Sec. 1900.4  Ratification.

    All written instruments affecting title to real or personal 
property, including but not limited to deeds, releases, satisfactions, 
subordination agreements, severance agreements, consents, waivers, 
assignments, declarations of trust, and heretofore executed by officials 
or employees of the agencies or other entities referred to in 
Sec. 1900.1 to carry out any purpose authorized by law, incident to the 
administration of programs under the jurisdiction of said agencies or 
other entities, are hereby approved, confirmed, and ratified.

[44 FR 18162, Mar. 27, 1979]



Sec. 1900.5  Assignment of cases.

    The State Director may, in writing, assign responsibilities and 
functions to a different office or staff position within the FmHA or its 
successor agency under Public Law 103-354 State organizational structure 
other than that referred to in regulations, provided no benefits, 
rights, or opportunities of the public are changed.

[55 FR 43325, Oct. 29, 1990]



Sec. 1900.6  Chair, Loan Resolution Task Force.

    The Chair, Loan Resolution Task Force is delegated the following 
authorities, to be exercised until September 30, 1996:
    (a) The responsibility for, under applicable Farmers Home 
Administration or its successor agency under Public Law 103-354 
regulations, collecting and settling all delinquent direct Farmer 
Program loans as defined in the Consolidated Farm and Rural Development 
Act, as amended, that have received all primary servicing rights and 
pre-acceleration homestead and preservation loan servicing rights under 
7 CFR part 1951, subpart S;
    (b) The responsibility for making and directing the making of loan 
servicing decisions, under applicable Farmers Home Administration or its 
successor agency under Public Law 103-354 regulations, concerning 
delinquent direct Farmer Programs loans for which accrued principal and 
interest equals or exceeds one million dollars, to extend to borrowers 
their remaining primary servicing rights and pre-acceleration homestead 
and preservation loan servicing rights under 7 CFR part 1951, subpart S;
    (c) Authority for approving the grant of exceptions pursuant to 
Secs. 1951.916, 1955.21, 1956.99 and 1965.35 of this chapter, to the 
extent necessary to carry out the responsibilities described in 
paragraphs (a) and (b) of this section.

[59 FR 43441, Aug. 24, 1994]



Sec. 1900.7  Effect on other regulations.

    This subpart does not revoke or modify any other delegation or 
redelegation, instruction, procedure, or regulation issued by, or under 
authority of, the Administrator of the Farmers Home Administration or 
its successor agency under Public Law 103-354.

[44 FR 18162, Mar. 27, 1979. Redesignated at 55 FR 43325, Oct. 29, 1990. 
Further redesignated at 59 FR 43441, Aug. 24, 1994]



         Subpart B--Adverse Decisions and Administrative Appeals

    Source: 60 FR 67318, Dec. 29, 1995, unless otherwise noted.



Sec. 1900.51  Definitions.

    Act means the Federal Crop Insurance Reform and Department of 
Agriculture Reorganization Act of 1994, Public Law No. 103-354 (7 U.S.C. 
6991 et seq.).
    Agency means the Rural Utilities Service (RUS), the Rural Housing 
Service (RHS), and the Rural Business-Cooperative Development Service 
(RBS), or their successor agencies.
    Refer to 7 CFR 11.1 for other definitions applicable to appeals of 
adverse decisions covered by this subpart.



Sec. 1900.52  General.

    This subpart specifies procedures for use by USDA personnel and 
program participants to ensure that full and complete consideration is 
given to program participants who are affected by an agency adverse 
decision.



Sec. 1900.53  Applicability.

    (a) Appeals of adverse decisions covered by this subpart will be 
governed by 7 CFR part 11.

[[Page 11]]

    (b) The provisions of this subpart apply to adverse decisions 
concerning direct loans, loan guarantees, and grants under the following 
programs: RUS Water and Waste Disposal Facility Loans and Grants 
Program; RHS Housing and Community Facilities Loan Programs; RBS Loan, 
Grant, and Guarantee Programs and the Intermediary Relending Program; 
and determinations of the Rural Housing Trust 1987-1 Master Servicer.
    (c) This subpart does not apply to decisions made by parties outside 
an agency even when those decisions are used as a basis for decisions 
falling within paragraph (b) of this section, for example: decisions by 
state governmental construction standards-setting agencies (which may 
determine whether RHS will finance certain houses); Davis-Bacon wage 
rates; flood plain determinations; archaeological and historical areas 
preservation requirements; and designations of areas inhabited by 
endangered species.



Sec. 1900.54  Effect on assistance pending appeal.

    (a) Assistance will not be discontinued pending the outcome of an 
appeal of a complete or partial adverse decision.
    (b) Notwithstanding the provisions of paragraph (a) of this section, 
administrative offsets initiated under subpart C of part 1951 will not 
be stayed pending the outcome of an appeal and any further review of the 
decision to initiate the offset.



Sec. 1900.55  Adverse action procedures.

    (a) If an applicant, guaranteed lender, a holder, borrower or 
grantee is adversely affected by a decision covered by this subpart, the 
decision maker will inform the participant of the adverse decision and 
whether the adverse decision is appealable. A participant has the right 
to request the Director of NAD to review the agency's finding of 
nonappealability in accordance with 7 CFR 11.6(a). In cases where the 
adverse decision is based on both appealable and nonappealable actions, 
the adverse action is not appealable.
    (b) A participant affected by an adverse decision of an agency is 
entitled under section 275 of the Act to an opportunity for a separate 
informal meeting with the agency before commencing an appeal to NAD 
under 7 CFR part 11.
    (c) Participants also have the right under section 275 of the Act to 
seek mediation involving any adverse decision appealable under this 
subpart if the mediation program of the State in which the participant's 
farming operation giving rise to the decision is located has been 
certified by the Secretary for the program involved in the decision. An 
agency shall cooperate in such mediation. Any time limitation for appeal 
will be stayed pending completion of the mediation process (7 CFR 
11.5(c)).



Sec. 1900.56  Non-appealable decisions.

    The following are examples of decisions which are not appealable:
    (a) Decisions which do not fall within the scope of this subpart as 
set out in Sec. 1900.53.
    (b) Decisions that do not meet the definition of an ``adverse 
decision'' under 7 CFR part 11.
    (c) Decisions involving parties who do not meet the definition of 
``participant'' under 7 CFR part 11.
    (d) Decisions with subject matters not covered by 7 CFR part 11.
    (e) Interest rates as set forth in agency procedures, except for 
appeals alleging application of an incorrect interest rate.
    (f) The State RECD Director's refusal to request an administrative 
waiver provided for in agency program regulations.
    (g) Denials of assistance due to lack of funds or authority to 
guarantee.

[[Page 12]]



Sec. 1900.57  [Reserved]

              Exhibit A to Subpart B of Part 1900[Reserved]

Exhibit B-1 to Subpart B of Part 1900--Letter for Notifying Applicants, 
Lender, Holders and Borrowers of Adverse Decisions Where the Decision Is 
                               Appealable

                 UNITED STATES DEPARTMENT OF AGRICULTURE

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

                            (Insert Address)

________________________________________________________________________
Date
    Dear ------------:PAfter careful consideration, we [were 
unable to take favorable action on your application/request for Farmers 
Home Administration or its successor agency under Public Law 103-354 
services] [are cancelling/reducing the assistance you are presently 
receiving]. The specific reasons for our decision are:

(Insert here the adverse decision and all of the specific reasons for 
the adverse action.)

    If you have any questions concerning the decision or the facts used 
in making our decision and desire further explanation, you may call or 
write the County Office (insert phone number) to request a meeting with 
(this office) (The County Committee) within 15 calendar days of the date 
of this letter. You should present any new information or evidence along 
with possible alternatives for our consideration. You may also bring a 
representative [or legal counsel] with you. You also have the right to 
appeal this decision to a hearing officer in lieu of, or in addition to, 
a meeting with [this office] [the County Committee]. See attachment for 
your appeal rights. (Attach Form FmHA or its successor agency under 
Public Law 103-354 1900-1.) (For guaranteed loans, except loss claims, 
the applicant and lender must jointly request a meeting and/or an 
appeal.)
    If you do not wish a meeting, as outlined above, a request for a 
hearing must be sent to the Area Supervisor, National Appeals Staff 
(address) ------------, postmarked no later than (month) ----------, 
(date) ----------.

(insert date 30 days from date of letter.)

    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, handicap, or age 
(provided that the applicant has the capacity to enter into a binding 
contract), because all or part of the applicant's income derives from 
any public assistance program, or because the applicant has in good 
faith exercised any right under the Consumer Credit Protection Act. The 
Federal Agency that administers compliance with the law concerning this 
creditor is the Federal Trade Commission, Equal Credit Opportunity, 
Washington, DC 20580.
    Sincerely,
________________________________________________________________________
(Decision Maker)
(County Supervisor may sign for County Committee)
________________________________________________________________________
(Title)

[55 FR 9874, Mar. 16, 1990]

Exhibit B-2 to Subpart B of Part 1900--Letter for Notifying Applicants, 
Lenders and Holders and Borrowers of Unfavorable Decision Reached at the 
                                 Meeting

                 UNITED STATES DEPARTMENT OF AGRICULTURE

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

                            (Insert Address)

________________________________________________________________________
Date
    Dear ------------:
    We appreciated the opportunity to review the facts relative to [your 
application/request for FmHA or its successor agency under Public Law 
103-354 services] [the assistance you are presently receiving]. We 
regret that our meeting with you did not result in a satisfactory 
conclusion.

(Insert here the adverse decision and all the specific reasons for the 
adverse action).

    See attachment for your appeal rights. (Attach Form FmHA or its 
successor agency under Public Law 103-354 1900-1) (For guaranteed loans, 
except loss claims, the applicant and lender must jointly request an 
appeal.)
    A request for a hearing must be sent to the Area Supervisor, 
National Appeals Staff ------------, postmarked no later than (month) --
----------, (date) ------------

(insert date 30 days from date of letter.)

    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, handicap, or age 
(provided that the applicant has the capacity to enter into a binding 
contract), because all or part of the applicant's income derives from 
any public assistance program, or because the applicant has in good 
faith exercised any right under the Consumer Credit Protection Act.

[[Page 13]]

The Federal Agency that administers compliance with the law concerning 
this creditor is the Federal Trade Commission, Equal Credit Opportunity, 
Washington, DC 20580.
    Sincerely,
________________________________________________________________________
(Decision Maker)
(County Supervisor may sign for County Committee)
________________________________________________________________________
(Title)

[55 FR 9874, Mar. 16, 1990]

Exhibit B-3 to Subpart B of Part 1900--Letter for Notifying Applicants, 
 Lender, Holders and Borrowers of Adverse Decisions Where the Decision 
Involves an Appraisal (Not To Be Used in Cases Involving Farmer Program 
                     Primary Loan Servicing Actions)

                 UNITED STATES DEPARTMENT OF AGRICULTURE

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

                            (Insert Address)

________________________________________________________________________
Date
    Dear------------:
    After careful consideration, we [were unable to take favorable 
action on your application/request for Farmers Home Administration or 
its successor agency under Public Law 103-354 services] [are cancelling/
reducing the assistance you are presently receiving]. The specific 
reasons for our decision are:

(Insert here the adverse decision and all of the specific reasons for 
the adverse action.)

    If you have any questions concerning the decision or the facts used 
in making our decision and desire further explanation, you may call or 
write the County Office (insert phone number) to request a meeting with 
(this office) (The County Committee) within 15 calendar days of the date 
of this letter. You should present any new information or evidence along 
with possible alternatives for our consideration. You may also bring a 
representative or legal counsel with you.
    If you do not wish to have a meeting as outlined above, you may 
contest the appraisal of the property value. In order to contest the 
appraisal you must first request review of the appraisal by the FmHA or 
its successor agency under Public Law 103-354 State Director. Your 
request for review by the State Director should be made through our 
office. You will be advised of the results of the State Director's 
review. If after the State Director's review you still disagree with the 
appraisal you may request a hearing. When you receive the results of the 
State Director's review you will be advised on how to ask for a hearing. 
Your request for review of the appraisal must be postmarked no later 
than (month)----------, (date) -------- (insert date 15 days from date 
of letter).
    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, handicap, or age 
(provided that the applicant has the capacity to enter

[55 FR 9874, Mar. 16, 1990]

Exhibit B-4 to Subpart B of Part 1900--Letter for Notifying Applicants, 
Lenders and Holders and Borrowers of Unfavorable Decision Reached After 
State Director Review of an Appraisal (Not To Be Used in Cases Involving 
             Farmer Program Primary Loan Servicing Actions)

                 UNITED STATES DEPARTMENT OF AGRICULTURE

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

                            (Insert Address)

________________________________________________________________________
Date
    Dear ------------:
    At your request we have reviewed the appraisal of the property you 
wish to purchase. We have determined that the value estimate of the 
property is both supportable and defensible (as required by FmHA or its 
successor agency under Public Law 103-354 regulations and appraisal 
industry standards) and therefore acceptable.
    You have the right to appeal this decision. You must show why the 
appraisal is in error. You may submit an independent appraisal, at your 
expense, from a qualified appraiser who is a designated member of [the 
American Institute of Real Estate Appraisers, Society of Real Estate 
Appraisers, American Society of Farm Managers and Rural Appraisers, 
etc.,] or an equivalent organization requiring appraisal education, 
testing and experience. The appraisal must conform to Agency Appraisal 
regulations applicable to the loan program.
    See attachment for your appeal rights.
    A request for a hearing must be sent to the Area Supervisor, 
National Appeals Staff (address) ------------, postmarked no later than 
(month) ------------, (date) ------------,

(insert date 30 days from date of letter)

    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of

[[Page 14]]

race, color, religion, national origin, sex, marital status, handicap, 
or age (provided that the applicant has the capacity to enter into a 
binding contract), because all or part of the applicant's income derives 
from any public assistance program, or because the applicant has in good 
faith exercised any right under the Consumer Credit Protection Act. The 
Federal Agency that administers compliance with the law concerning this 
creditor is the Federal Trade Commission, Equal Credit Opportunity, 
Washington, DC 20580.
    Sincerely,
________________________________________________________________________
(State Director)

[55 FR 9875, Mar 16, 1990]

 Exhibit C to Subpart B of Part 1900--Letter for Notifying Applicants, 
Lenders, Holders, and Borrowers of Adverse Decisions When Part or All of 
 the Decision Is Not Appealable [Not Used in Connection With Decisions 
        Related to Nonprogram Applicants, Borrowers, or Property]

                 UNITED STATES DEPARTMENT OF AGRICULTURE

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

                            (Insert Address)

________________________________________________________________________
(Date)
    Dear ------------:
    After careful consideration we [were unable to take favorable action 
on your application/request for Farmers Home Administration or its 
successor agency under Public Law 103-354 services] [are cancelling/
reducing the assistance you are presently receiving].

(Insert and number all of the specific reasons for the adverse action. 
Examples of nonappealable reasons are listed in Sec. 1900.55(a)).

    If you have any questions about this action, we would like the 
opportunity to explain in detail why your request has not been approved, 
explain any possible alternative, or provide any other information you 
would like. You may bring any additional information you may have and 
you may bring a representative or counsel if you wish. Please call 
(telephone number) for an appointment.
    Applicants and borrowers generally have a right to appeal adverse 
decisions, but FmHA or its successor agency under Public Law 103-354 
decisions based on certain reasons are not appealable. We have 
determined that the reason(s) numbered -------- for the decision in this 
case make(s) the decision not appealable under FmHA or its successor 
agency under Public Law 103-354 regulations. You may, however, write the 
Area Supervisor, National Appeals Staff (insert address) for a review of 
the accuracy of our finding that the decision is not appealable, 
postmarked no later than (month) --------, (date) -------- (insert date 
30 days from date of letter).
    The Federal Equal Credit Opportunity Act prohibits creditors from 
discriminating against credit applicants on the basis of race, color, 
religion, national origin, sex, marital status, handicap, or age 
(provided that the applicant has the capacity to enter into a binding 
contract), because all or part of the applicant's income derives from 
any public assistance program, or because the applicant has in good 
faith exercised any right under the Consumer Credit Protection Act. The 
Federal Agency that administers compliance with the law concerning this 
creditor is the Federal Trade Commission, Equal Credit Opportunity, 
Washington, DC 20580.
    Sincerely,
________________________________________________________________________
(Decision Maker)
(County Supervisor may sign for County Committee)
________________________________________________________________________
(Title)

[55 FR 9875, Mar. 16, 1990, as amended at 58 FR 52646, Oct. 12, 1993]

    Editorial Note: At 58 FR 52646, Oct. 12, 1993, the Farmers Home 
Administration attempted to amend exhibit C of subpart B of part 1900 by 
removing in the second paragraph the words ``(month) --------,''; 
however, because ``(month) --------'' does not exist in the second 
paragraph, this amendment could not be incorporated.

      Exhibit D to Subpart B of Part 1900--Hearings/Review Officer 
                              Designations

                   Hearing/Review Officer Designations
------------------------------------------------------------------------
    Decisionmaker or decision       Hearing officer     Review officer
------------------------------------------------------------------------
County Supervisor...............  National Appeals    State Director and/
                                   Staff Hearing       or Director,
                                   Officer.            National Appeals
                                                       Staff.
County Committee................  National Appeals    State Director and/
                                   Staff Hearing       or Director,
                                   Officer.            National Appeals
                                                       Staff.
*District Director, *State        National Appeals    **State Director
 Program Chief, *District          Staff Hearing       and/or Director,
 Specialist.                       Officer.            National Appeals
                                                       Staff.

[[Page 15]]

 
*State Director, *Regional        As appointed by     Director, National
 Director.                         Director,           Appeals Staff.
                                   National Appeals
                                   Staff.
Division Director or Assistant    As appointed by     Director, National
 Administrator.                    Director,           Appeals Staff.
                                   National Appeals
                                   Staff.
Assistant Administrator.........  As appointed by     Director, National
                                   Director,           Appeals Staff.
                                   National Appeals
                                   Staff.
Deputy or Associate               As appointed by     Director, National
 Administrator.                    Director,           Appeals Staff.
                                   National Appeals
                                   Staff.
------------------------------------------------------------------------
*Decisionmaker for Rural Development Administration or its successor
  agency under Public Law 103-354 (RDA or its successor agency under
  Public Law 103-354) cases for Regional Office Operations.
**Review officer will be the Regional Director and/or the Director,
  National Appeals Staff for RDA or its successor agency under Public
  Law 103-354 cases.

                                  Notes

    1. District Director also means Assistant District Director or 
District Loan Specialist.
    2. County Supervisor also means Assistant County Supervisor with 
loan approval authority.
    3. The Director of the National Appeals Staff may designate a staff 
member to conduct a hearing or review. When the hearing/review is 
completed, the designee will send the complete case file, hearing notes, 
tape recordings, and a recommended decision to the Director for a final 
decision. The Director may, for individual cases, delegate final 
decision authority to a designee.
    4. For decisions not directly covered above, advice should be sought 
from the Director of the National Appeals Staff.
    5. An appellant may elect to have an appeal reviewed by the State 
Director, or the Director of the National Appeals Staff. The decision of 
the State Director will be subject to further review by the Director of 
the National Appeals Staff upon request of the appellant.

[58 FR 4065, Jan. 13, 1993]



                 Subpart C--Applicability of Federal Law



Sec. 1900.101  General.

    This subpart provides Agency policy concerning:
    (a) The applicability of Federal rather than State Law in the 
conduct of Farmers Home Administration (FmHA) or its successor agency 
under Public Law 103-354 operations, and
    (b) The liability of an auctioneer for conversion of personal 
property mortgaged to FmHA or its successor agency under Public Law 103-
354.

[44 FR 10979, Feb. 26, 1979, as amended at 45 FR 8934, Feb. 11, 1980]



Sec. 1900.102  Applicable law.

    Loans made by FmHA or its successor agency under Public Law 103-354 
are authorized and executed pursuant to Federal programs adopted by 
Congress to achieve national purposes of the U.S. Government.
    (a) Instruments evidencing or securing a loan payable to or held by 
the Farmers Home Administration or its successor agency under Public Law 
103-354, such as promissory notes, bonds, guaranty agreements, 
mortgages, deeds of trust, financing statements, security agreements, 
and other evidences of debt or security shall be construed and enforced 
in accordance with applicable Federal law.
    (b) Instruments evidencing a guarantee, conditional commitment to 
guarantee, or a grant, such as contracts of guarantee, grant agreements 
or other evidences of an obligation to guarantee or make a grant, 
executed by the Farmers Home Administration or its successor agency 
under Public Law 103-354, shall be construed and enforced in accordance 
with applicable Federal law.
    (c) In order to implement and facilitate these Federal loan 
programs, the application of local procedures, especially for 
recordation and notification purposes, may be utilized to the fullest 
extent feasible and practicable. However, the use of local procedures 
shall not be deemed or construed to be any waiver by FmHA or its 
successor agency under Public Law 103-354 of Federal

[[Page 16]]

immunity from any local control, penalty, or liability, or to subject 
FmHA or its successor agency under Public Law 103-354 to any State 
required acts or actions subsequent to the delivery by FmHA or its 
successor agency under Public Law 103-354 officials of the instrument to 
the appropriate local or State official.
    (d) Any person, corporation, or organization that applies for and 
receives any benefit or assistance from FmHA or its successor agency 
under Public Law 103-354 that offers any assurance or security upon 
which FmHA or its successor agency under Public Law 103-354 relies for 
the granting of such benefit or assistance, shall not be entitled to 
claim or assert any local immunity, privilege, or exemption to defeat 
the obligation such party incurred in obtaining or assuring such Federal 
benefit or assistance.
    (e) The liability of an auctioneer for conversion of personal 
property mortgaged to FmHA or its successor agency under Public Law 103-
354 shall be determined and enforced in acceptance with the applicable 
Federal law. ``Auctioneer'' for the purposes of this subpart includes a 
commission merchant, market agency, factor or agent. In all cases in 
which there has been a disposition without authorization by FmHA or its 
successor agency under Public Law 103-354 of personal property mortgaged 
to that agency, any auctioneer involved in said disposition shall be 
liable to the Government for conversion--notwithstanding any State 
statute or decisional rule to the contrary.

[44 FR 10979, Feb. 26, 1979]



 Subpart D--Processing and Servicing FmHA or Its Successor Agency Under 
  Public Law 103-354 Assistance to Employees, Relatives, and Associates

    Source: 58 FR 224, Jan. 5, 1993, unless otherwise noted.



Sec. 1900.151  General.

    (a) Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 Instruction 2045-BB (available in any FmHA or its 
successor agency under Public Law 103-354 office) requires the 
maintenance of high standards of honesty, integrity, and impartiality by 
employees. To reduce the potential for employee conflict of interest, 
any processing, approval, servicing or review activity, including access 
through automated information systems, is conducted only by authorized 
FmHA or its successor agency under Public Law 103-354 employees who:
    (1) Are not themselves the recipient.
    (2) Are not members of the family or known close relatives of the 
recipient.
    (3) Do not have an immediate working relationship with the 
recipient, the employee related to the recipient, or the employee who 
would normally conduct the activity.
    (4) Do not have a business or close personal association with the 
recipient.
    (b) No provision of this subpart takes precedence over individual 
program requirements or restrictions, especially those restrictions 
found in FmHA or its successor agency under Public Law 103-354 
Instruction 2045-BB (available in any FmHA or its successor agency under 
Public Law 103-354 office) relating to eligibility for FmHA or its 
successor agency under Public Law 103-354 assistance of FmHA or its 
successor agency under Public Law 103-354 employees, members of families 
of employees, close relatives, or business or close personal associates 
of employees.
    (c) The determination of a case's need for special handling under 
the provisions of this subpart is not an adverse action and, therefore, 
is not subject to appeal.



Sec. 1900.152  Definitions.

    Applicant or borrower. All persons or organizations, individually or 
collectively, applying for or receiving insured or guaranteed loan or 
grant assistance from or through FmHA or its successor agency under 
Public Law 103-354. Referred to as recipient.
    Assistance. Loans or grants made, insured or guaranteed, or serviced 
by FmHA or its successor agency under Public Law 103-354.
    Associates. All persons with whom an employee has a business or 
close personal association or immediate working relationship.

[[Page 17]]

    Business association. Business relationship between those with an 
identity of financial interest; including but not limited to a business 
partnership, being an officer, director, trustee, partner or employee of 
an organization, or other long-term contractual relationship.
    Close personal association. Social relationship between unrelated 
residents of the same household.
    Close relatives. The spouse, relatives and step-relatives of an 
employee or the employee's spouse, including Grandmother, Grandfather, 
Mother, Father, Aunt, Uncle, Sister, Brother, Daughter, Son, Niece, 
Nephew, Granddaughter, Grandson, and First Cousin.
    Conflict of interest. A situation (or the appearance of one) in 
which one could reasonably conclude that an FmHA or its successor agency 
under Public Law 103-354 employee's private interest conflicts with his 
or her Government duties and responsibilities, even though there may not 
actually be a conflict.
    Employee. All FmHA or its successor agency under Public Law 103-354 
personnel, including gratuitous employees and those negotiating for or 
having arrangements for prospective employment, except as otherwise 
specifically stated. For the purposes of this instruction only, the term 
also refers to county or area committee members, elected or appointed, 
and to closing agents who, although they are not employees, have a 
special relationship to FmHA or its successor agency under Public Law 
103-354 and therefore should be subject to these provisions.
    Immediate working relationship. A relationship between a subordinate 
and a supervisor in a direct line, or between co-workers in the same 
office. For the purposes of this subpart, the relationships among a 
County Supervisor and members of the local County Committee are 
immediate working relationships.
    Members of family. Blood and in-law relatives (such as by marriage 
or adoption) who are residents of the employee's household.
    Recipient. One who has applied for or received FmHA or its successor 
agency under Public Law 103-354 financial assistance in the form of a 
loan or grant. See definition of applicant or borrower.



Sec. 1900.153  Identifying and reporting an employee relationship.

    (a) Responsiblity of applicant. When an application for assistance 
is filed, the processing official asks if there is any known 
relationship or association with an FmHA or its successor agency under 
Public Law 103-354 employee. The applicant is required to disclose the 
requested information under subpart A of part 1910 of this chapter and 
pertinent program regulations.
    (b) Responsibility of FmHA or its successor agency under Public Law 
103-354 employee. An FmHA or its successor agency under Public Law 103-
354 employee who knows he or she is related to or associated with an 
applicant or recipient, regardless of whether the relationship or 
association is known to others, is required to notify the FmHA or its 
successor agency under Public Law 103-354 official who is processing or 
servicing the assistance, in writing. FmHA or its successor agency under 
Public Law 103-354 Guide Letter 1900-D-1 (available in any FmHA or its 
successor agency under Public Law 103-354 office) may be used as the 
notice. If the appropriate official is not known, the State Director 
should be notified. Regardless of whether the relationship or 
association is defined in Sec. 1900.152 of this subpart, if the employee 
believes there may be a potential conflict of interest, the FmHA or its 
successor agency under Public Law 103-354 official who is processing or 
servicing the assistance may be notified and special handling requested. 
An employee's request that the case receive special handling is usually 
honored.
    (c) Responsibility of FmHA or its successor agency under Public Law 
103-354 official. When any relationship or association is identified, 
the FmHA or its successor agency under Public Law 103-354 official 
completes and submits FmHA or its successor agency under Public Law 103-
354 Guide Letter 1900-D-2 (available in any FmHA or its successor agency 
under Public Law 103-354 office) to the State Director (or 
Administrator, under paragraph (e) of this section or Sec. 1900.155(a) 
of this subpart). When completed FmHA or its successor agency under 
Public Law 103-354 Guide Letter 1900-D-3 (available in any FmHA or its 
successor agency under

[[Page 18]]

Public Law 103-354 office) is returned by the State Director, the 
processing official;
    (1)-(2) [Reserved]
    (3) Notifies the recipient in writing of the change in 
responsibility and any other pertinent information,
    (4) [Reserved]
    (d) Relationship or association established after application for 
FmHA or its successor agency under Public Law 103-354 assistance. If a 
relationship or association is established after an application has been 
filed or assistance has been provided, both recipient and employee are 
required to notify the FmHA or its successor agency under Public Law 
103-354 official who is processing or servicing the assistance. FmHA or 
its successor agency under Public Law 103-354 Guide Letter 1900-D-1 
(available in any FmHA or its successor agency under Public Law 103-354 
office) may be used for the notice.
    (e) Relationship or association with a State Office, Finance Office 
or National Office employee. If an identified relationship or 
association is with an employee at a State Office (other than a State 
Director), Finance Office or National Office, the processing/servicing 
official completes and submits FmHA or its successor agency under Public 
Law 103-354 Guide Letter 1900-D-2 (available in any FmHA or its 
successor agency under Public Law 103-354 office) to the State Director 
in the normal manner. The State Director reviews the information, 
determines the need for special handling, designates the processing/
servicing official, completes and submits FmHA or its successor agency 
under Public Law 103-354 Guide Letter 1900-D-3 (available in any FmHA or 
its successor agency under Public Law 103-354 office) to the 
Administrator for written concurrence. When the Administrator's 
concurrence is received, the State Director returns completed FmHA or 
its successor agency under Public Law 103-354 Guide Letter 1900-D-3 to 
the original official who completes the action described in paragraph 
(c) of this section.
    (f) Relationship or association with a State Director. If an 
identified relationship or association is with a State Director, the 
processing/servicing official completes and submits FmHA or its 
successor agency under Public Law 103-354 Guide Letter 1900-D-2 
(available in any FmHA or its successor agency under Public Law 103-354 
office) to the Administrator. The Administrator reviews, determines the 
need for special handling, designates the processing/servicing official, 
completes and returns FmHA or its successor agency under Public Law 103-
354 Guide Letter 1900-D-3 (available in any FmHA or its successor agency 
under Public Law 103-354 office) to the original official who completes 
the action described in paragraph (c) of this section.
    (g) Change in relationship or association, status of FmHA or its 
successor agency under Public Law 103-354 assistance, or employee's duty 
station. If the relationship or association has changed, the application 
denied or the assistance otherwise terminated, or the FmHA or its 
successor agency under Public Law 103-354 employee's duty station 
changed, the designated processing/servicing official completes FmHA or 
its successor agency under Public Law 103-354 Guide Letter 1900-D-2 
(available in any FmHA or its successor agency under Public Law 103-354 
office) with the new information and submits it. The review process 
takes place as described in paragraphs (a) through (e) of this section 
to determine if processing/servicing activity may return to normal or 
requires another change. If the assistance is denied or otherwise 
terminated, the designated official notifies the original official.



Sec. 1900.154  Determining the need for special handling.

    The State Director (or Administrator, under Sec. 1900.153(e) or 
Sec. 1900.155(a) of this subpart):
    (a) [Reserved]
    (b) Determines whether the reported relationship or association is 
defined in Sec. 1900.152 of this subpart and would violate the 
provisions of Sec. 1900.151(a) of this subpart,
    (c)-(f) [Reserved]



Sec. 1900.155  Designating the processing/servicing official.

    (a) Designating an official with equivalent authority. The State 
Director (or Administrator, under Sec. 1900.253(e) of

[[Page 19]]

this subpart or this paragraph) designates a nonrelated or nonassociated 
FmHA or its successor agency under Public Law 103-354 official 
authorized to conduct the activity under program regulations, 
established delegation of authority and approval authority under subpart 
A of part 1901 of this chapter, and whose duty station is most 
convenient to the recipient and to the security property. A type and/or 
amount of assistance processed or serviced by a County Supervisor or at 
a County Office should be assigned only to another County Supervisor or 
County Office. A type and/or amount of assistance processed or serviced 
by a District Director or at a District Office should be assigned only 
to another District Director or District Office.
    (b) County Committee. For processing or servicing decisions to be 
made by a County Committee, if the recipient is a member, a different 
County Committee is designated. If the recipient is related to or 
associated with the member, notwithstanding the provisions of 
Sec. 1900.151(a)(3) of this subpart, the State Director may permit the 
decision to be made by the local committee, if the related/associated 
member abstains.
    (c) [Reserved]



Sec. 1900.156  Special handling--processing.

    (a) [Reserved]
    (b) Eligibility determination. The designated processing official 
reviews the application and develops additional data as necessary. Upon 
determination of whether the assistance will be provided, the designated 
processing official notifies the applicant of the decision in writing 
under program regulations, subpart A of part 1910 of this chapter, and 
subpart B of part 1900. If the determination is favorable, unless 
otherwise designated, the complete application is returned to the 
original processing official for docket preparation. If the 
determination is unfavorable, the designated processing official as 
decisionmaker participates in the appeal process to its conclusion.
    (c)-(e) [Reserved]
    (f) Closing agent. Unless there is a clear or apparent conflict of 
interest, closing will be at a location and by a closing agent chosen by 
the recipient.
    (g) Supervised bank account. Unless there is a clear or apparent 
conflict of interest, any supervised bank account (or construction 
account) is established at a financial institution chosen by the 
recipient under supbart A of part 1902 of this chapter. Countersignature 
authority is delegated only to a nonrelated or nonassociated FmHA or its 
successor agency under Public Law 103-354 official.
    (h) Construction inspection. Construction inspections are delegated 
to a nonrelated or nonassociated employee authorized to conduct 
inspections, whose duty station is nearest the construction site. The 
designated processing/servicing official notifies the builder (or 
architect/engineer) in writing of how and from whom to request 
inspections.



Secs. 1900.157-1900.200  [Reserved]



PART 1901--PROGRAM-RELATED INSTRUCTIONS--Table of Contents




Subparts A-D [Reserved]

             Subpart E--Civil Rights Compliance Requirements

1901.201  Purpose.
1901.202  Nondiscrimination in FmHA or its successor agency under Public 
          Law 103-354 programs.
1901.203  Title VIII of the Civil Rights Act of 1968.
1901.204  Compliance reviews.
1901.205  Nondiscrimination in construction financed with FmHA or its 
          successor agency under Public Law 103-354 loan or grant.

Exhibit A to Subpart E--Civil Rights Compliance Reviews
Exhibit B to Subpart E--Summary Report of Civil Rights Compliance 
          Reviews
Exhibit C to Subpart E--FmHA or Its Successor Agency Under Public Law 
          103-354 Financed Contract
Exhibit D to Subpart E--Goals and Timetables for Minorities and Women
Exhibit E to Subpart E--List of Regional Offices, Office of Federal 
          Contract Compliance Programs (OFCCP), U.S. Department of Labor 
          (USDL)

Subpart F--Procedures for the Protection of Historical and Archeological 
                               Properties

1901.251  Purpose.
1901.252  Policy.
1901.253  Definitions.

[[Page 20]]

1901.254  Scope.
1901.255  Historical and archeological assessments.
1901.256-1901.258  [Reserved]
1901.259  Actions to be taken when archeological properties are 
          discovered during construction.
1901.260  Coordination with other agencies.
1901.261  [Reserved]
1901.262  State supplement.
Exhibit A to Subpart F--National Park Service, U.S. Department of the 
          Interior Regional Offices

Subparts G-J [Reserved]

    Subpart K--Certificates of Beneficial Ownership and Insured Notes

1901.501  Purpose.
1901.502  Policy.
1901.503  Definitions.
1901.504  Authorities and responsibilities.
1901.505  Certificates of beneficial ownership in FmHA or its successor 
          agency under Public Law 103-354 loans.
1901.506  Book-entry procedure for FmHA or its successor agency under 
          Public Law 103-354 securities--issuance and redemption of 
          certificate by Reserve bank.
1901.507  Certificates of beneficial ownership issued by the FmHA or its 
          successor agency under Public Law 103-354 Finance Office.
1901.508  Servicing of insured notes outstanding with investors.
1901.509  Loss, theft, destruction, mutilation, or defacement of insured 
          notes, insurance contracts, and certificates of beneficial 
          ownership.

Subparts L-M [Reserved]

                   Subpart N--Indian Outreach Program

1901.651  Purpose.
1901.652  Goals.
1901.653  Field action.
1901.654  FmHA or its successor agency under Public Law 103-354 
          publications.
1901.655  Reports.

    Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 42 U.S.C. 1480.

Subparts A-D [Reserved]



             Subpart E--Civil Rights Compliance Requirements

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 40 U.S.C. 442; 42 U.S.C. 
1480, 2942.



Sec. 1901.201  Purpose.

    This subpart contains policies and procedures for implementing the 
regulations of the Department of Agriculture issued pursuant to Title VI 
of the Civil Rights Act of 1964, title VIII of the Civil Rights Act of 
1968, Executive Order 11246 and the Equal Credit Opportunity Act of 
1974, as they relate to the Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354. Nothing herein shall be 
interpreted to prohibit preference to American Indians on Indian 
Reservations.

[41 FR 40112, Sept. 17, 1976]



Sec. 1901.202  Nondiscrimination in FmHA or its successor agency under Public Law 103-354 programs.

    (a) Nondiscrimination by recipients of FmHA or its successor agency 
under Public Law 103-354 assistance. (1) No recipient of FmHA or its 
successor agency under Public Law 103-354 financial assistance will 
directly or through contractual or other arrangements subject any person 
or cause any person to be subjected to discrimination on the ground of 
race, color, or national origin, with respect to any program or 
facility. This prohibition applies but is not restricted to unequal 
treatment in priority, quality, quantity, methods, or charges for 
service, use, occupancy or benefit, participation in the service or 
benefit available, or in the use, occupancy or benefit of any structure, 
facility, or improvement provided with FmHA or its successor agency 
under Public Law 103-354 financial assistance.
    (2) Specifically, and without limiting the general applicability of 
this subpart, such recipient will not on the grounds of race, color, or 
national origin:
    (i) Deny any person the use, occupancy, or enjoyment of the whole or 
any part of real or personal property or service, financial aid, or 
other benefit under any program or facility.
    (ii) Provide any person with any service, use, occupancy, or other 
benefit different from that provided others by the program or facility.

[[Page 21]]

    (iii) Subject any person to segregation or separate treatment in any 
matter related to his or her receipt of any service or other benefit.
    (iv) Restrict in any way any person's enjoyment of any right, 
privilege, or advantage enjoyed by others through the facility or 
activity.
    (v) Treat any person differently from others in determining whether 
he or she satisfies any requirements or conditions for any admission or 
membership in the recipient or in any other organization.
    (vi) Deny any person an opportunity or restrict opportunity to 
participate in a program or facility by:
    (A) Refusing or failing to provide notice or services provided 
others for the purpose of encouraging participation in the program or 
facility; or
    (B) Providing any person with such notice or services different from 
the notice or services provided others.
    (vii) Utilize criteria or methods of administration that have the 
effect of subjecting a person to discrimination with respect to any 
program or facility or defeating or substantially impairing the 
achievement of the objectives of a program or facility.
    (viii) Select sites or locate facilities with the purpose or effect 
of:
    (A) Excluding individuals from, denying them the benefits of, or 
subjecting them to discrimination under any programs to which the 
regulations in this subpart apply; or
    (B) Defeating or substantially impairing the achievement of the 
objectives of the regulations in this subpart.
    (ix) Continue any previous or existing discriminatory practices, but 
will take affirmative action to overcome the effects of such 
discrimination.
    (x) Deny any person the opportunity to participate as a member of a 
planning or advisory body which is an integral part of the program.
    (b) Nondiscrimination by FmHA or its successor agency under Public 
Law 103-354 employees. (1) No. FmHA or its successor agency under Public 
Law 103-354 employee will exclude from participation in, or deny the 
benefits of, any program or activity administered by FmHA or its 
successor agency under Public Law 103-354, or subject to discrimination 
any person in the United States on the ground of race, color, religion, 
sex, national origin, or marital status.
    (2) No FmHA or its successor agency under Public Law 103-354 
employee will:
    (i) Be limited in the discharge of his or her responsibilities to 
working with applicants solely on the basis of race, color, religion, 
sex, national origin, or marital status.
    (ii) Obstruct equal access to buildings, facilities, structures, or 
lands under the control of FmHA or its successor agency under Public Law 
103-354.
    (iii) Deny under any program or activity of FmHA or its successor 
agency under Public Law 103-354 equal opportunity for employment; for 
participation in meetings, demonstrations, training activities or 
programs; for receiving awards; for receipt of information disseminated 
by publication, news, radio, and other media; for obtaining contracts, 
grants, loans or other financial assistance, or for selection to assist 
in the administration of programs or activities of FmHA or its successor 
agency under Public Law 103-354.
    (3) No FmHA or its successor agency under Public Law 103-354 
employee will, while conducting official business, participate in or 
attend any segregated meetings or meetings held in a segregated facility 
from which persons are excluded because of race, color, religion, sex, 
national origin, or marital status.
    (c) Intimidating or retaliatory acts. No recipient or other person 
will intimidate, threaten, coerce, or discriminate against any person 
for the purpose of interfering with any right or privilege under this 
subpart, or because a person has made a complaint or has testified, 
assisted, or participated in any manner in an investigation, proceeding, 
or hearing related to a complaint. The identity of complainants will be 
kept confidential except to the extent necessary to carry out the 
purposes of this subpart.
    (d) Nondiscrimination Agreement. The County Supervisor will, at the 
time FmHA or its successor agency under Public Law 103-354 assistance is 
requested, give all applicants for loans and grants listed in 
Sec. 1901.204(a) a copy

[[Page 22]]

of Form FmHA or its successor agency under Public Law 103-354 400-4, 
``Nondiscrimination Agreement,'' and inform the applicant that 
assistance will be conditioned upon executing this form and complying 
with the requirements of this subpart.
    (e) Covenants. Each instrument of conveyance for loans subject to 
title VI of the Civil Rights Act of 1964, as outlined in Sec. 1901.204, 
must contain the following covenant: ``The property described herein was 
obtained or improved through Federal financial assistance. This property 
is subject to the provisions of title VI of the Civil Rights Act of 1964 
and the regulations issued pursuant thereto for so long as the property 
continues to be used for the same or similar purpose for which financial 
assistance was extended or for so long as the purchaser owns it, 
whichever is longer.''
    (f) Posters. The nondiscrimination poster, ``And Justice For All,'' 
will be displayed at the facilities and/or office of any borrower or 
grantee if the facilities have been financed by an FmHA or its successor 
agency under Public Law 103-354 loan or grant and are subject to title 
VI of the Civil Rights Act of 1964. This poster also will be displayed 
in all FmHA or its successor agency under Public Law 103-354 State and 
County Offices.
    (g) Racial and ethnic data. Recipients should maintain, for review 
by FmHA or its successor agency under Public Law 103-354 and other 
appropriate agencies, racial and ethnic data showing the extent to which 
members of minority groups are beneficiaries of FmHA or its successor 
agency under Public Law 103-354-assisted programs. The data should 
identify recipients as White, Negro or Black, American Indian, Spanish 
Surname, Oriental and Other.
    (h) Discrimination complaints. (1) Any person or any specific class 
of persons, if they believe they have been subject to discrimination 
prohibited by this subpart, may file a written complaint with any FmHA 
or its successor agency under Public Law 103-354 office, or, if they 
prefer with the Secretary of Agriculture. Persons who complain of 
discrimination will be advised of their rights to file complaints. A 
complaint must be filed not later than 180 days after the date of the 
alleged discrimination, unless the time for filing is extended by the 
Secretary of Agriculture.
    (2) A complaint filed with the County Supervisor or the State 
Director will be referred promptly to the Administrator, Attention: 
Equal Opportunity Officer. Attached to the complaint should be a 
statement by the County Supervisor or State Director identifying the 
recipient and type of assistance provided by FmHA or its successor 
agency under Public Law 103-354, indicating whether a nondiscrimination 
agreement has been signed, and giving any other available pertinent 
information about the complaint.

[41 FR 40112, Sept. 17, 1976]



Sec. 1901.203  Title VIII of the Civil Rights Act of 1968.

    FmHA or its successor agency under Public Law 103-354 employees, 
FmHA or its successor agency under Public Law 103-354 borrowers, 
contractors, packagers, and others who provide housing for sale or rent, 
are obligated under the provisions of title VIII of the Civil Rights Act 
of 1968 to provide fair housing to all persons regardless of race, 
color, religion, sex, or national origin.
    (a) Coverage. The prohibitions against discrimination in the sale, 
rental, or financing of housing contained in title VIII apply to:
    (1) All dwellings financed by loans made by the Federal Government 
and, therefore, to all RH borrowers.
    (2) Any person in the business of selling or renting dwellings 
defined as:
    (i) The owner of a dwelling intended for occupancy by five or more 
families.
    (ii) Any person who has participated as principal in the sale or 
rental of three or more dwellings in the past year.
    (iii) Any person who has served as sale or rental agent in two or 
more transactions in the past year.
    (b) Discrimination acts prohibited. Title VIII prohibits FmHA or its 
successor agency under Public Law 103-354 employees, multiple housing 
borrowers, and those with whom FmHA or its successor agency under Public 
Law 103-354

[[Page 23]]

does business (contractors, realtors, packagers) from:
    (1) Refusing to sell or rent a particular dwelling because of a 
person's race, color, religion, or national origin. The following 
actions constitute violations of this provision:
    (i) Refusing to package an RH loan application.
    (ii) Refusing or failing to show a particular dwelling or home in a 
particular subdivision.
    (iii) Directing persons only to areas populated by those of similar 
race, color, religion, or national origin when housing is available in 
other areas.
    (iv) Representing unsold dwellings or sites as sold to prospective 
buyers.
    (2) Requiring applicants for services to meet different terms or 
conditions because of their race, color, religion, or national origin; 
for example, requiring larger rents or downpayments from minority 
applicants.
    (3) Including in any advertising either directly or through visual 
representation a preference for applicants of a particular race or 
ethnic origin.
    (i) Words indicative of the race or ethnic background of the 
dwelling or landlord such as ``White private home,'' or ``all Black 
subdivision,'' may not be used in advertising housing financed or to be 
financed by FmHA or its successor agency under Public Law 103-354.
    (ii) Selection of advertising media and the areas to be covered by 
any advertising must be made to reach potential applicants of all races 
or ethnic origins.
    (c) FmHA or its successor agency under Public Law 103-354 
affirmative action. (1) It is the policy of the Farmers Home 
Administration or its successor agency under Public Law 103-354 to 
administer its housing program affirmatively so individuals of similar 
income levels in the housing market area have housing choices available 
to them regardless of their race, color, religion, sex, or national 
origin. Each participant in FmHA or its successor agency under Public 
Law 103-354 housing program shall pursue affirmative fair housing 
marketing policies in soliciting buyers and tenants, in determining 
their eligibility and in concluding sales and rental transactions.
    (2) Applicability. The affirmative fair housing marketing 
requirements shall apply as follows:
    (i) Participants in FmHA or its successor agency under Public Law 
103-354 housing programs who request approval for subdivision 
development involving five or more sites, multi-family projects with 
five or more units including self-help technical assistance grantees 
assisting five or more families or five or more conditional commitments 
for single family dwelling units during a 12-month period must submit an 
affirmative marketing plan.
    (ii) An Affirmative Fair Housing Marketing Plan is required to be 
prepared and submitted to FmHA or its successor agency under Public Law 
103-354 by the contractor when:
    (A) A real estate broker is offering five or more single-family 
dwellings located in the same subdivision for sale under an exclusive 
listing contract with FmHA or its successor agency under Public Law 103-
354.
    (B) An auctioneer under contract with FmHA or its successor agency 
under Public Law 103-354 is offering five or more single-family 
dwellings located in the same subdivision for sale by public auction.
    (C) A contractor under a contract with FmHA or its successor agency 
under Public Law 103-354 is managing a multiple-family housing project 
of five or more units or five or more single-family dwellings located in 
the same subdivision.
    (3) Affirmative fair housing marketing plans will be submitted on 
form HUD 935.2(3-76) or the participant must be a signatory to a 
voluntary affirmative marketing agreement approved by the Department of 
Housing and Urban Development. The plan, if submitted on form HUD 
935.2(3-76) shall describe an affirmative program which will meet the 
following requirements:
    (i) Reaching those prospective buyers or tenants, regardless of sex, 
of majority and minority groups in the marketing area who traditionally 
would not be expected to apply for such housing without special outreach 
efforts because of existing racial or socio-economic patterns.
    (ii) Undertaking and/or maintaining a non-discriminatory hiring 
policy in

[[Page 24]]

recruiting from both majority and minority groups including both sexes, 
for staff engaged in the sale or rental of properties.
    (iii) Training and instructing employees engaged in the sale or 
rental properties in the policy and application of nondiscrimination and 
fair housing.
    (iv) Displaying in all sales and rental offices the ``Fair Housing'' 
poster.
    (v) Posting in a conspicuous position on each property and FmHA or 
its successor agency under Public Law 103-354 construction site a sign 
displaying the equal opportunity logo or the following statement:

    We are pledged to the letter and spirit of U.S. policy for the 
achievement of equal housing opportunity throughout the nation. We 
encourage and support an affirmative advertising and marketing program 
in which there are no barriers to obtaining housing because of race, 
color, religion, sex, or national origin.

    (vi) Undertaking efforts to publicize the availability of housing 
opportunities to minority persons through the type of media customarily 
used by the applicant or participant, including minority publications 
and other minority outlets available in the housing market area. As part 
of these efforts all advertising must include either the equal housing 
opportunity logo or statement. When illustrations or persons are 
included they shall depict persons of both sexes and of majority and 
minority groups.
    (4) The affirmative fair housing marketing plans or evidence that 
the participant is covered by an approved voluntary affirmative 
marketing agreement must be submitted as follows:
    (i) For subdivisions with the preliminary submission of plans and 
specifications.
    (ii) For multi-family projects, including rural rental housing, 
labor housing, cooperative housing, technical assistance grants and site 
development loans with SF 424.1, ``Application for Federal Assistance 
(For Non-construction)'', or SF 424.2, ``Application for Federal 
Assistance (For Construction)'', or with the letter of application. 
Subsequent loans or grants extended to the participant will necessitate 
a new or updated plan.
    (iii) For conditional commitments for five or more individual 
dwelling units in a 12-month period with the application for the fifth 
conditional commitment.
    (iv) For real estate brokers listing housing properties on an 
exclusive basis, at any time more than 5 properties are listed for sale 
by FmHA or its successor agency under Public Law 103-354 in the same 
subdivision.
    (5) Affirmative fair housing marketing plans will cover the 
following time periods:
    (i) For subdivision, from time of application until all lots are 
sold.
    (ii) For multi-family projects from time of application until the 
loan is paid in full or for so long as the project is being used for the 
same or a similar purpose for which the funds were extended.
    (iii) For conditional commitments involving individual dwelling 
units, one year or until all units built through conditional commitments 
issued within the one year period have been sold.
    (iv) For real estate brokers who list acquired rural housing 
properties under an exclusive listing contract, one year or until all 
properties covered under the plan have been sold, whichever is later.
    (6) Affirmative fair housing marketing plans will be reviewed and 
approved by the official authorized to approve the assistance requested. 
The County Supervisor will review and submit with comments to the 
official authorized to approve the assistance requested, those fair 
housing marketing plans where the assistance requested exceeds his 
approval authority. Any participant covered by this section must have an 
approved affirmative fair housing marketing plan for any assistance 
approved 90 or more days after the issuance of these regulations.
    (7) Approved affirmative fair housing marketing plans will be made 
available by the participant for public inspection at the participant's 
place of business and at each sales or rental office. Participants who 
fulfill the requirements of this section by filing a Form HUD 9352(3-76) 
will maintain records to reflect their efforts in fulfilling the 
affirmative fair housing marketing plan.

[[Page 25]]

These records will be made available for review by FmHA or its successor 
agency under Public Law 103-354 personnel. Affirmative fair housing 
marketing plans will be reviewed by FmHA or its successor agency under 
Public Law 103-354 personnel in accordance with section 2006-M of this 
chapter.
    (8) Applicants failing to comply with these requirements will be 
liable to sanctions authorized by regulations, rules or policies 
governing the program in which they are participating including but not 
limited to denial of further participation in FmHA or its successor 
agency under Public Law 103-354 programs and referral to the Department 
of Justice for suit by the United States for injunctive or other 
appropriate relief.
    (d) Discrimination complaints. (1) Complaints against FmHA or its 
successor agency under Public Law 103-354 employees or borrowers under 
title VIII of the Civil Rights Act of 1968 received by the County Office 
will be sent to the State Director. The State Director will forward the 
complaints to the Administrator, Attention: Equal Opportunity Officer.
    (2) Complaints of discrimination against packagers, contractors or 
others with whom FmHA or its successor agency under Public Law 103-354 
deals should be filed with the Department of Housing and Urban 
Development. However, these complaints may be accepted by FmHA or its 
successor agency under Public Law 103-354 employees and routed through 
the State Director to the Administrator, Attention: Equal Opportunity 
Officer.
    (e) Relations to other regulations. Nothing in this section in any 
way interferes with the administration of the nondiscrimination 
requirements of Title VI of the Civil Rights Act of 1964 or the ``Equal 
Opportunity in Housing Certification,'' signed by all packagers.

[41 FR 40112, Sept. 17, 1976, as amended at 42 FR 45894, Sept. 13, 1977; 
42 FR 58737, Nov. 11, 1977; 50 FR 23903, June 7, 1985; 53 FR 27825, July 
25, 1988; 55 FR 13503, Apr. 11, 1990]



Sec. 1901.204  Compliance reviews.

    (a) Recipients subject to reviews. Recipients of the following kinds 
of loans and/or grants who received their loans or advances of funds on 
or after January 3, 1965, will be reviewed for compliance in accordance 
with Title VI of the Civil Rights Act of 1964. Guaranteed loans are not 
covered by Title VI and, therefore, are not subject to compliance 
reviews.
    (1) Farm Ownership loans to install or improve recreational 
facilities or other nonfarm enterprises.
    (2) Operating loans to install or improve recreational facilities or 
other nonfarm enterprises.
    (3) Economic Opportunity loans to individuals for nonagricultural 
enterprises.
    (4) Individual Recreation loans.
    (5) Loans for Water and Waste Disposal facilities, including 
Resource Conservation and Development loans for this purpose.
    (6) Community Facility loans.
    (7) Watershed loans and advances.
    (8) Recreation Association loans including those made from Resource 
Conservation and Development funds.
    (9) Economic Opportunity loans to incorporated cooperative 
associations (Compliance reviews on unincorporated Economic Opportunity 
cooperatives subject to title VI will be conducted only as the need 
arises or as directed by either the State Director or the 
Administrator).
    (10) Grazing Association loans, including Resource Conservation and 
Development loans for this purpose.
    (11) Loans to Timber Development organizations.
    (12) Rural Renewal loans and advances.
    (13) Rural Rental Housing (formerly Senior Citizen rental) and Rural 
Cooperative Housing loans.
    (14) Labor Housing loans and/or grants.
    (15) Rural Housing Site loans.
    (16) Business and Industrial Insured loans or grants.
    (17) Technical Assistance grants.
    (18) Development grants for water and waste disposal.
    (19) Technical Assistance and Training grants in accordance with 
Title XIII of Pub. L. 99-198.
    (20) Rural Business Enterprise grants and Television Demonstration 
grants.
    (21) Section 601 Energy Impacted Area Development Assistance grants.

[[Page 26]]

    (22) Nonprofit National Corporations grants.
    (23) System for Delivery of Certain Rural Development Programs Panel 
Grants.
    (24) Emergency Community Water Assistance grants.
    (25) Section 306C WWD loans and grants.
    (26) Housing Application Packaging Grants.
    (27) Rural and Cooperative Development Grants in subpart F of part 
4284 of this title.
    (28) Community Facilities Grants in part 3570, subpart B, of this 
title.
    (b) Duration of obligation for conducting reviews. Compliance 
reviews will be conducted on recipients of loans and grants listed in 
paragraph (a) of this section:
    (1) Until the loan is paid in full or otherwise satisfied; or sold 
through the sale of FmHA or its successor agency under Public Law 103-
354's assets; or
    (2) Until the last advance of grant funds is made for the grants 
listed in paragraph (a) of this section.
    (c) Compliance reviews of loans and grants to individuals--(1) 
Compliance Review Officer. The County Supervisor will conduct compliance 
reviews of loans made to individuals.
    (2) Type of review. If the borrower is currently receiving loan 
supervision, the County Supervisor may complete the compliance review 
based on his knowledge of the borrower's operations from other visits. 
Otherwise the County Supervisor must visit the borrower's facilities. 
Before completing the compliance review, the County Supervisor should be 
aware of:
    (i) The borrower's operating regulations, for example, the grounds 
for eviction from a Rural Rental Housing Project.
    (ii) The borrower's method of advertising the facility to the 
public, if there is any advertising, including how well these methods 
reach the minority community.
    (iii) Any records of request for use of the borrower's facility.
    (3) Recording results of review. The County Supervisor's 
determination that the borrower is or is not in compliance with title 
VI, together with information such as that outlined in paragraph (b)(2) 
of this section, will be recorded in the running record. Review of 
individual Rural Rental Housing borrowers will be recorded on Form FmHA 
or its successor agency under Public Law 103-354 400-8, ``Compliance 
Review (Nondiscrimination by Recipients of Financial Assistance Through 
FmHA or its successor agency under Public Law 103-354.)''
    (4) Reporting results of review. If the borrower is in compliance, 
the County Supervisor will report his findings to the State Director. 
Exhibit A is a sample report. In the case of Rural Rental Housing 
borrowers, a copy of Form FmHA or its successor agency under Public Law 
103-354 400-8 will be filed in the borrower's County Office loan docket, 
and the original will be sent to the State Director. If the borrower is 
not in compliance, the borrower's name, location, type of loan involved, 
and the reasons for the finding of noncompliance will be sent to the 
State Director.
    (5) Forwarding report of noncompliance. The State Director will see 
that all compliance review reports are complete. If the recipient was 
found in noncompliance, the State Director will immediately send a copy 
of the compliance review report to the Administrator, Attention: Equal 
Opportunity Officer, with recommended action to take to bring the 
recipient into compliance.
    (d) Review of loans or grants to organizations (any borrower or 
grantee other than an individual)--(1) Designation of compliance review 
officer. The State Director, except for Technical Assistance and 
Training grants (Pub. L. 99-198) and Nonprofit National Corporations 
grants, will designate the Compliance Review Officer for recipient 
organization. County Supervisors may be designated only if they have 
received approved compliance review training. Otherwise, the Compliance 
Review Officer must be a member of the State staff. For Technical 
Assistance and Training grants and Nonprofit National Corporations 
grants, the Assistant Administrator for Community and Business Programs 
will designate the Compliance Review Officer for recipient 
organizations.

[[Page 27]]

    (2) Type of review. Compliance reviews may be completed in 
connection with regular supervision visits to organizations and must 
include an inspection of the FmHA or its successor agency under Public 
Law 103-354-financed facility. Before determining that the recipient is 
or is not complying with the provisions in Form FmHA or its successor 
agency under Public Law 103-354 400-4, the Compliance Review Officer 
will:
    (i) Observe the recipient's records, including records on the 
present membership by race, the handling of applications for use of the 
facility, the user rates and membership fees or dues, and the facility's 
operating regulations.
    (ii) Determine if the recipient advertises for members or users. If 
so, observe the effectiveness of the recipient's methods of advertising 
the availability of the facility to the public, and especially the 
effectiveness of this advertising in reaching the minority community.
    (iii) Interview organization officials, members, and employees. In 
reviews of recipients of Technical Assistance grants, members of the 
self-help housing groups should be interviewed to determine the way in 
which they were recruited.
    (iv) Interview informed local community leaders, including minority 
leaders, if any to determine if the facility is operating without 
discrimination because of race, color, or national origin.
    (3) Recording results of reviews--(i) Association, Watershed, 
Resource Conservation and Development, and Rural Renewal loans involving 
recreation facilities. Reviews will be recorded on Form FmHA or its 
successor agency under Public Law 103-354 400-7, ``Compliance Reviews 
for Recreational Loans to Associations (FmHA or its successor agency 
under Public Law 103-354 Borrowers).'' If the organization is found in 
compliance with title VI, the original of the form will be sent to the 
State Director, and a copy will be filed in the borrower's County Office 
loan docket. If the organization is found in noncompliance, any 
additional information which led to the finding will be sent with the 
form.
    (ii) Loans and/or grants for Water and Waste Disposal systems, 
incorporated Economic Opportunity cooperatives, Grazing associations, 
Rural Rental Housing, Labor Housing, and Rural Housing Sites. Reviews 
will be completed on Form FmHA or its successor agency under Public Law 
103-354 400-8. The original of the form will be sent to the State 
Director and a copy filed in the borrower's County Office loan docket. 
If the organization is found in noncompliance, any additional 
information which led to the finding will be sent with the form.
    (iii) Timber Development organizations, Rural Cooperative Housing 
loans, and Technical Assistance grants. The information obtained during 
the compliance review as well as the Compliance Review Officer's 
determination of the borrower's compliance or noncompliance will be 
recorded in the running record. If the organization is found in 
compliance, a report (see exhibit A) will be sent to the State Director. 
If the organization is not in compliance, the organization's name, 
location, type of loan received, and all information which led to the 
finding will be sent to the State Director.
    (iv) Technical Assistance and Training grants (Pub. L. 99-198) and 
Nonprofit National Corporations grants. The Compliance Review Officer 
will record in the running record information obtained during the 
compliance review and the determination of recipient's compliance or 
noncompliance. A report will be prepared and sent to the Assistant 
Administrator, Community and Business Programs, for each recipient.
    (4) Mandatory hook-up ordinance. Compliance reviews of public entity 
borrowers or grantees for water and waste disposal facilities who are 
operating under the provisions of a mandatory hook-up ordinance will 
consist of a certification by the borrower or grantee that the ordinance 
is still in effect and is being enforced.
    (5) Forwarding noncompliance report. The State Director will see 
that the reports are complete. If the recipient was found in 
noncompliance, the State Director will immediately send a copy of the 
report to the Administrator, Attention: Equal Opportunity Officer, with 
action proposed to bring the recipient

[[Page 28]]

into compliance. For Technical Assistance and Training grants and 
Nonprofit National Corporations grants, the Assistant Administrator, 
Community and Business Programs, will send a copy of the report to the 
Equal Opportunity Officer.
    (e) Timing of reviews--(1) Reporting year. The State Director will 
schedule Civil Rights compliance reviews from November 1 to October 31 
of each year. For example, compliance reviews scheduled during 1976 
should be conducted after November 1, 1975, but before October 31, 1976.
    (2) Initial reviews--(i) Water and Waste Disposal loan and/or grant. 
The initial compliance review will be conducted before loan or grant 
closing or before the construction begins, whichever occurs first.
    (ii) Technical Assistance grants, Technical Assistance and Training 
grants (Pub. L. 99-198) and Nonprofit National Corporations grants. The 
initial compliance review will be conducted before the grant is closed.
    (iii) Rural Housing Site loan. The initial compliance review will be 
conducted at the beginning of the sale of the sites developed with the 
FmHA or its successor agency under Public Law 103-354 loan.
    (iv) Watershed loans for future water supply. The initial compliance 
review will be made when usage of the stored water begins.
    (v) All other loans and/or grants. The initial compliance review of 
loans and/or grants listed in paragraph (a) of this section will be 
conducted within the first reporting year after the loan or grant is 
closed or after Form FmHA or its successor agency under Public Law 103-
354 400-4 is signed.
    (3) Subsequent reviews. The State Director is responsible for 
requiring subsequent compliance reviews at intervals not less than 90 
days, or more than 3 years, after the previous compliance review.
    (i) For Water and Waste Disposal organizations with loans that have 
had at least two compliance reviews after loan closing covering a six-
year period, and where no discriminatory practices are indicated, the 
frequency of subsequent reviews may be reduced to six years.
    (ii) If Water and Waste Disposal organizations have merged to form a 
new organization, two reviews will be conducted at 3-year intervals 
after the merger and one every 6 years thereafter, provided no 
discriminatory practices are noted.
    (f) State Office summary reports. The State Director will keep a 
list of all compliance reviews conducted during the reporting year so as 
to schedule each year's reviews. The State Director will submit a copy 
of this list to the Administrator, Attention: Equal Opportunity Office, 
no later than July 31 of each year. Recipients found in noncompliance 
will also be listed on the summary report. Exhibit B is a sample report. 
For Technical Assistance and Training grants and Nonprofit National 
Corporations grants, the Assistant Administrator, Community and Business 
Programs, will submit a summary report, using exhibit B of this subpart 
as a guide, to the Equal Opportunity Officer by July 31 of each year.

[41 FR 40112, Sept. 17, 1976, as amended at 52 FR 41949, Nov. 2, 1987; 
53 FR 3860, Feb. 10, 1988; 55 FR 5962, Feb. 21, 1990; 57 FR 11559, Apr. 
6, 1992; 58 FR 5565, Jan. 22, 1993; 58 FR 58643, Nov. 3, 1993; 59 FR 
41389, Aug. 12, 1994; 61 FR 3781, Feb. 2, 1996; 62 FR 16468, Apr. 7, 
1997; 62 FR 33510, June 19, 1997; 62 FR 42387, Aug. 7, 1997]



Sec. 1901.205  Nondiscrimination in construction financed with FmHA or its successor agency under Public Law 103-354 loan or grant.

    Executive Order 11246 provides for equal employment opportunity 
without regard to race, color, religion, sex, or national origin and the 
elimination of all facilities segregated on the basis of race, color, 
religion, or national origin on construction work financed by FmHA or 
its successor agency under Public Law 103-354 involving a construction 
contract of more than $10,000.
    (a) Compliance. This section applies to Federal or federally 
assisted construction contracts or subcontracts in excess of $10,000 for 
on-site construction. It also applies to invitations for bids published 
for such construction. If construction work of over $10,000 is partially 
financed by another Federal Agency, the County Supervisor will try to 
reach an agreement as to which

[[Page 29]]

agency will administer the nondiscrimination requirements. If unable to 
reach an agreement, the County Supervisor will refer the case to the 
State Director.
    (b) Requirements of applicants, contractors, or subcontractors and 
responsible FmHA or its successor agency under Public Law 103-354 
officials--(1) Applicant. The applicant will be required to execute Form 
FmHA or its successor agency under Public Law 103-354 400-1, ``Equal 
Opportunity Agreement,'' at the time the loan is closed or before 
construction is started, whichever occurs first. If the applicant is an 
incorporated association, a resolution of the governing body will 
authorize execution of the form. Municipalities or other public bodies 
will have to incorporate references to this form in the loan resolution 
before it is adopted. If the applicant wants to publish for bids, the 
applicant must obtain Form FmHA or its successor agency under Public Law 
103-354 1924-5, ``Invitation for Bid (Construction Contract)'' which is 
in compliance with Executive Order 11246, from the local FmHA or its 
successor agency under Public Law 103-354 County Supervisor.
    (2) Contractor or Subcontractor. (i) The prospective contractor or 
subcontractor must submit Form FmHA or its successor agency under Public 
Law 103-354 400-6, ``Compliance Statement,'' to the County Supervisor 
before contract bid negotiations, and comply with the requirements of 
Executive Order 11246, which are included with Form FmHA or its 
successor agency under Public Law 103-354 1924-6, ``Construction 
Contract,'' during the performance of the contract. The contract will 
contain the required ``Standard Federal Equal Employment Opportunity 
Construction Contract Specifications'' goals and timetables as set forth 
in exhibit D.
    (ii) The contractor or subcontractor will prepare and submit Form 
Contract Compliance (CC) 257, ``Monthly Employment Utilization Report'' 
to the appropriate regional office of the U.S. Department of Labor 
(USDL) (see exhibit E, ``List of Regional Offices'') by the fifth of 
each month through completion of the contract.
    (3) The County Supervisor or the responsible FmHA or its successor 
agency under Public Law 103-354 official will: (i) Deliver to the 
contractor the following forms, as appropriate:
    (A) Form FmHA or its successor agency under Public Law 103-354 400-
3, ``Notice to Contractors and Applicants,'' with an attached Equal 
Employment Opportunity Poster. Posters in Spanish will be provided when 
appropriate,
    (B) Form FmHA or its successor agency under Public Law 103-354 400-
6, and
    (C) Form CC 257.
    (ii) Deliver to the applicant Form FmHA or its successor agency 
under Public Law 103-354 1924-5 when contractors are to be invited to 
submit bids, and Form FmHA or its successor agency under Public Law 103-
354 1924-6 to contract for construction.
    (iii) Explain to applicant and contractor the requirements of 
Executive Order 11246, when needed. However, inquiries concerning 
compliance must be addressed to the appropriate regional office of USDL 
(see exhibit E).
    (iv) Submit a report similar in form and content to exhibit C 
(``FmHA or its successor agency under Public Law 103-354 Financed 
Contract'') of this Instruction to the appropriate regional office of 
USDL (Exhibit E) within 10 calendar days of the date a contract or 
subcontract in excess of $10,000 is awarded.
    (c) Contractors with 100 or more employees and contract over 
$10,000. Contractors with 100 or more employees and contract over 
$10,000, will file the following with the Joint Reporting Committee, 
1800 G Street NW., Washington, DC 20006:
    (1) SF-100 ``Employer Information Report EEO-1,'' within 30 days of 
contract award unless the report has been submitted within the past 12 
months, and
    (2) An annual report by March 31, so long as the contractor holds 
any FmHA or its successor agency under Public Law 103-354 financed 
contract in excess of $10,000.
    (d) Contractor with at least 50 employees and contract of $50,000 or 
more. Each contractor or subcontractor with at least 50 employees and 
contract of

[[Page 30]]

$50,000 or more, must develop a written affirmative action compliance 
program for each project. This must be on file in each contractor's or 
subcontractor's personnel file within 120 days after the beginning of 
the contract. Form AD-425 provides guidelines for developing compliance 
programs.
    (e) Compliance during construction. The County Supervisor will:
    (1) Check to see that:
    (i) Required posters are displayed.
    (ii) There is no evidence of discrimination in employment.
    (2) Record findings on Form FmHA or its successor agency under 
Public Law 103-354 1924-12, ``Inspection Report.''
    (3) If there is any evidence of noncompliance, the County Supervisor 
will report all the facts to the appropriate office of USDL (see exhibit 
E).
    (f) Hometown Plans. All construction contracts and subcontracts in 
excess of $10,000, financed by FmHA or its successor agency under Public 
Law 103-354, in areas which have Hometown Plans regarding affirmative 
action and equal employment, are subject to the conditions set forth in 
the applicable plan. Each State Director should seek the advice of the 
OGC as to compliance with any such plans in the State Director's 
jurisdiction.
    (g) Discrimination complaints. (1) Complaints alleging 
discriminatory acts may be filed directly with the appropriate regional 
office of USDL (see exhibit E) or with the County Supervisor or the 
State Director for subsequent forwarding to the above address, by any 
employee or applicant for employment with a contractor or subcontractor.
    (2) Each complaint must be in writing and signed by the complainant 
(The FmHA or its successor agency under Public Law 103-354 official 
receiving the complaint will assist complainant when necessary). The 
complaint will include:
    (i) Name, address, and telephone number of complainant.
    (ii) Name and address of the person allegedly discriminating.
    (iii) Date and place of the discrimination.
    (iv) Description of the discrimination.
    (v) Any other information that will assist in investigating and 
resolving the complaint.
    (3) Complaints must be filed not later than 180 days after the 
alleged act unless the State Director extends the time, for good cause 
shown by the complainant.

[43 FR 58356, Dec. 14, 1978, as amended at 44 FR 24852, Apr. 27, 1979; 
52 FR 8002, Mar. 13, 1987]

  Exhibit A to Subpart E of Part 1901--Civil Rights Compliance Reviews

To: State Director, FmHA or its successor agency under Public Law 103-
354.

    Civil Rights compliance reviews have been conducted, and each 
recipient listed below was found in compliance with title VI of the 
Civil Rights Act of 1964. Information which led to this finding and my 
determination that the recipient is in compliance are in the running 
record of the recipient's file.

----------------------------------------------------------------------------------------------------------------
              Recipient                        Case No.          Type of assistance \1\       Date of review
----------------------------------------------------------------------------------------------------------------
Sam H. Smith.........................  99-05-7031 (rec.).......  OL                      Jan. 3, 1975.
John A. Jones........................  99-05-8764..............  RL                      Feb. 17, 1975.
Medina Housing Association...........  99-05-9176 grant........  TA                      Mar. 5, 1975.
----------------------------------------------------------------------------------------------------------------
\1\ Indicate only the loans or grants received which are subject to compliance reviews.

________________________________________________________________________
                                                       County Supervisor

  Exhibit B to Subpart E of Part 1901--Summary Report of Civil Rights 
                           Compliance Reviews

To: Administrator, FmHA or its successor agency under Public Law 103-
354.
Attention: Director, Equal Opportunity Staff.

    I. Civil Rights Compliance Reviews have been conducted, and the 
following recipients were found in compliance with title VI of the Civil 
Rights Act of 1964.

[[Page 31]]



------------------------------------------------------------------------
                                                        Type of review
                                                    --------------------
                Loan type           Loan number        Pre-award* post-
                                                           award**
------------------------------------------------------------------------
1.
2.
3.
------------------------------------------------------------------------
*A pre-award review is a compliance review conducted prior to loan or
  grant approval.
**A post-award review is a compliance review conducted after loan
  closing.

    II. The following recipients were found in non-compliance:

----------------------------------------------------------------------------------------------------------------
                                                                            Type of review
                                                                         --------------------   Date report of
        Name of borrower               Loan type          Loan number       Pre-award post-   noncompliance sent
                                                                                 award           to nat. ofc.
----------------------------------------------------------------------------------------------------------------
1.
2.
3.
----------------------------------------------------------------------------------------------------------------

________________________________________________________________________
State Director.

(7 U.S.C. 1989; 42 U.S.C. 1480; 7 CFR 2.23; 7 CFR 2.70)

[47 FR 39127, Sept. 7, 1982]

Exhibit C to Subpart E of Part 1901--FmHA or Its Successor Agency Under 
                  Public Law 103-354 Financed Contract

To: Area Director, Office of Federal Contract Compliance Program, U.S. 
          Department of Labor (DOL) (Insert address for your DOL area, 
          from exhibit E, FmHA or its successor agency under Public Law 
          103-354 Instruction 1901-E)

    We submit the following information relative to a construction 
contract in excess of $10,000:

1. Contractor's name:___________________________________________________
Address:________________________________________________________________
Telephone Number:_______________________________________________________
Employer's Identification Number:_______________________________________

2. Contract for: ---- $----------

Starting Date:__________________________________________________________
Completion Date:________________________________________________________
Contract Number:________________________________________________________
City:___________________________________________________________________
DOL Region:_____________________________________________________________

[52 FR 8002, Mar. 13, 1987]

Exhibit D to Subpart E of Part 1901--Goals and Timetables for Minorities 
                                and Women

    The preamble to regulations establishing a new part 60-4 to 41 CFR 
chapter 60 published at 43 FR 14888-14894, April 7, 1978, states that 
OFCCP contemplates proposing standards and goals for minorities within 
the very near future. Until that notice has been proposed and final 
action taken, construction contractors and subcontractors will continue 
to be subject to the goals and timetables for minority utilization on 
Federal and federally assisted construction existing now under Executive 
order 11246. Such goals are published in appendix B.
    Now, therefore, based on the foregoing and 41 CFR part 60-4, each 
contracting agency, each applicant, and each contractor shall include 
the appropriate goal set forth in appendix A and appendix B in all 
invitations for bids or other solicitations for federally involved 
construction contracts in excess of $10,000. The goals in appendix A 
hereby are established on a nationwide basis as the standards for female 
utilization for all trades.
    Appendix B established the goals for minority utilization which 
shall be applicable for the respective areas set forth in appendix B.
    Appendix A and appendix B shall be effective with respect to 
transactions for which the invitations for bids or other solicitations 
or amendments thereto are sent, on or after May 8, 1978.
                                                    Weldon J. Rougeau,  
                                                        Director, OFCCP.
    March 28, 1978.

                               Appendix A

    The following goals and timetables for female utilization shall be 
included in all Federal and federally assisted construction contracts 
and subcontracts in excess of $10,000. The goals are applicable to the 
contractor's aggregate on-site construction workforce whether or not 
part of that workforce is performing work on a Federal or federally 
assisted construction contract or subcontract.

                              area covered

    Goals for Women apply nationwide.

[[Page 32]]



                          Goals and Timetables
------------------------------------------------------------------------
                                                                 Goals
                          Timetable                            (percent)
------------------------------------------------------------------------
From Apr. 1, 1978 until Mar. 31, 1979........................        3.1
From Apr. 1, 1979 until Mar. 31, 1980........................        5.1
From Apr. 1, 1980 until Mar. 31, 1981........................        6.9
------------------------------------------------------------------------

                               Appendix B

    Until further notice, the following goals and timetables for 
minority utilization shall be included in all Federal or federally 
assisted construction contracts and subcontracts in excess of $10,000 to 
be performed in the respective covered areas. The goals are applicable 
to the contractor's aggregate on-site construction workforce whether or 
not part of that workforce is performing work on a Federal or federally 
assisted construction contract or subcontract.

                               Region \1\
---------------------------------------------------------------------------

    \1\ Region refers to the 10 regions in which the U.S. Department of 
Labor has offices. These Regions are headquartered in Boston, New York, 
Philadelphia, Atlanta, Chicago, Dallas, Kansas City, Denver, San 
Francisco, and Seattle, which are numbered I through X respectively.
---------------------------------------------------------------------------

                           boston, mass. area

    Area covered-- Arlington, Boston, Belmont, Brookline, Burlington, 
Cambridge, Canton, Chelsea, Dedham, Everett, Malden, Medford, Wakefield, 
Westwood, Winthrop, Winchester, Woburn, and the Islands of Boston 
Harbor, Mass.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............  10.8-10.12
                                Boilermakers................    9.6-12.0
                                Bricklayers.................    8.0-10.0
                                Carpenters..................   11.6-14.5
                                Cement masons...............   25.5-27.5
                                Electricians................     6.0-7.0
                                Elevator constructors.......    9.5-11.4
                                Glaziers....................    8.8-11.0
                                Ironworkers.................     5.9-6.9
                                Lathers.....................     6.9-8.9
                                Operating engineers.........   14.1-15.0
                                Painters....................    9.1-11.1
                                Pipefitters.................   11.0-12.1
                                Plasterers..................   20.5-22.5
                                Plumbers....................    9.8-11.8
                                Roofers.....................    8.4-10.5
                                Sheetmetal workers..........   10.1-12.1
                                Sprinkler fitters...........   12.3-15.6
                                All other trades............   10.3-12.3
------------------------------------------------------------------------

                       state of rhode island area

    Area covered-- Statewide.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................         5.0
------------------------------------------------------------------------

                                region ii

                            buffalo, ny area

    Area covered-- Erie County and Buffalo, NY.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
              Timetable                        Trade             Goal
------------------------------------------------------------------------
Until further notice................  All...................   10.6-13.2
------------------------------------------------------------------------

                             camden, nj area

    Area covered-- Camden, NJ, area of Camden, Salem, and Gloucester 
Counties.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............   11.6-14.5
                                Boilermakers................   10.8-13.5
                                Bricklayers.................   17.8-20.0
                                Carpenters..................   11.2-13.0
                                Cement masons...............   12.0-15.0
                                Electricians................   14.9-17.8
                                Elevator constructors.......   10.8-13.5
                                Glaziers....................   16.0-20.0
                                Lathers.....................   10.8-13.5
                                Operating engineers.........   10.0-12.5
                                Painters/decorators/            8.8-12.8
                                 paperhangers.
                                Plasterers..................   17.0-19.0
                                Plumbers/pipefitters/           8.4-10.5
                                 steamfitters.
                                Roofers.....................    8.4-10.5
                                Sheetmetal workers..........   11.2-14.0
                                Sprinkler fitters...........   10.8-13.5
                                Structural metal workers....   12.9-15.3
                                Wharf 7 dock builders.......   10.8-13.5
------------------------------------------------------------------------

                             elmira, ny area

    Area covered-- Chemung, Steuben, Schuyler, Tioga, and Yates 
Counties, NY.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     4.0-5.0
------------------------------------------------------------------------

                          long island, ny area

    Area covered-- Nassau and Suffolk Counties, NY.

[[Page 33]]



                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     6.0-8.0
------------------------------------------------------------------------

                          westchester, ny area

    Area covered-- Westchester County, NY.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       11-13
------------------------------------------------------------------------

                               region iii

                         state of delaware area

    Area covered-- State of Delaware.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       11-13
------------------------------------------------------------------------

                         philadelphia, pa, area

    Area covered-- Bucks, Chester, Delaware, Montgomery, and 
Philadelphia Counties, PA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Ironworkers.................       22-26
                                Plumbers and pipefitters....       20-24
                                Steamfitters................       20-24
                                Sheetmetal workers..........       19-23
                                Electrical workers..........       19-23
                                Elevator construction              19-23
                                 workers.
------------------------------------------------------------------------

                          pittsburgh, pa, area

    Area covered-- Allegheny County, PA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............   24.3-27.8
                                Boilermakers................   33.8-37.7
                                Bricklayers.................   11.9-13.0
                                Carpenters..................   11.8-12.9
                                Cement masons...............   16.3-18.1
                                Electricians................   17.0-20.3
                                Glaziers....................   26.9-30.4
                                Ironworkers.................   25.5-29.9
                                Lathers.....................   12.7-13.8
                                Operating engineers.........   44.2-48.3
                                Painters....................   16.4-17.9
                                Plasterers..................   34.3-38.0
                                Plumbers....................     7.8-9.2
                                Roofers.....................   47.1-50.1
                                Sheetmetal workers..........   26.0-26.9
                                Steamfitters................   10.1-12.9
                                Tile setters................   13.6-16.0
                                All other...................   27.6-31.5
------------------------------------------------------------------------

                          washington, dc, area

    Area covered-- District of Columbia; the Virginia cities of 
Alexandria, Fairfax, and Falls Church; the Virginia counties of 
Arlington, Fairfax, Loudoun, and Prince William; and the Maryland 
counties of Montgomery and Prince Georges.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Electricians................   28.0-34.0
                                Painters and paperhangers...   35.0-42.0
                                Plumbers, pipefitters and      25.0-30.0
                                 steamfitters.
                                Iron workers................   35.0-43.0
                                Sheetmetal workers..........   25.0-31.0
                                Elevator constructors.......   34.0-40.0
                                Asbestos workers............   26.0-32.0
                                Lathers.....................   34.0-40.0
                                Boilermakers................   24.0-30.0
                                Tile and terrazzo workers...   28.0-34.0
                                Glaziers....................   28.0-34.0
------------------------------------------------------------------------

                                Region IV

                            atlanta, ga, area

    Area covered-- Atlanta, GA, Standard Metropolitan Statistical Area 
which includes Fulton, DeKalb, Cobb, Clayton, and Gwinnett Counties.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............    8.6-10.3
                                Bricklayers.................   16.3-18.2
                                Carpenters..................   11.0-12.8
                                Electricians................   10.9-12.2
                                Glaziers....................   10.2-12.2
                                Ironworkers.................   14.0-16.0
                                Metal lathers...............   10.0-12.0
                                Painters....................   10.3-12.0
                                Plumbers....................    9.4-10.9
                                Pipefitters.................    9.4-10.9
                                Plasterers..................   24.4-25.8
                                Roofers.....................   18.0-20.0
                                Sheetmetal workers..........    9.5-11.3
                                Sprinkler fitters...........     8.3-9.9
                                Operating engineers.........   24.0-27.7
                                Elevator installers.........    9.6-11.5
------------------------------------------------------------------------

                          birmingham, al, area

    Area covered-- Jefferson, Shelby, and Walker Counties, AL.

[[Page 34]]



                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       20-24
------------------------------------------------------------------------

                           charlotte, nc, area

    Area covered-- Mecklenburg and Union Counties, NC.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       24-30
------------------------------------------------------------------------

                         jacksonville, fl, area

    Area covered-- Drival County, FL.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       20-23
------------------------------------------------------------------------

                          louisville, ky, area

    Area covered-- Adair, Barren, Bullitt, Carrol, Edmundson, Grayson, 
Green, Hardin, Hart, Henry, Jefferson, Larue, Meade, Nelson, Oldham, 
Shelby, Spencer, Taylor, Trimble, Warren, and Washington Counties, KY; 
and Clark, Floyd and Harrison Counties, IN.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   12.0-16.0
------------------------------------------------------------------------

                             miami, fl, area

    Area covered-- Dade County, FL.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   20.0-40.0
------------------------------------------------------------------------

                           nashville, tn, area

    Area covered-- City of Nashville, TN.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   16.0-20.0
------------------------------------------------------------------------

                                Region V

                             akron, oh, area

    Area covered-- Summit, Portage, and Medina Counties, OH.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   10.0-12.5
------------------------------------------------------------------------

                            canton, oh, area

    Area covered-- Carroll, Holmes, Stark, Tuscarawas, and Wayne 
Counties, OH.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     7.0-8.4
------------------------------------------------------------------------

                            chicago, il, area

    Area covered-- Cook, DuPage, Kane, Lake, McHenry, and Will Counties.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............    8.6-10.3
                                Bricklayers.................    16.3-8.2
                                Carpenters..................   11.0-12.8
                                Electricians................   10.9-12.2
                                Elevator installers.........    9.6-11.5
                                Glaziers....................   10.2-12.2
                                Ironworkers.................   14.0-16.0
                                Metal lathers...............   10.0-12.0
                                Painters....................   10.3-12.1
                                Plumbers....................    9.4-10.9
                                Pipe fitters................    9.4-10.9
                                Plasterers..................   24.4-25.8
                                Roofers.....................   18.0-20.0
                                Sheetmetal workers..........    9.5-11.3
                                Sprinkler fitters...........     8.3-9.9
                                Operating engineers.........       (\1\)
------------------------------------------------------------------------
\1\ 15.7 and above.

                          cincinnati, oh, area

    Area covered.-- Ohio counties of Clermont, Hamilton, and Warren and 
in the Kentucky counties of Boone, Campbell, and Kenton, and in the 
Indiana county of Dearborn.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............    9.3-12.2
                                Boilermakers................     8.0-8.4
                                Carpenters..................    9.0-10.7
                                Elevator constructors.......   10.2-12.7
                                Engineers (stationary)......   26.9-28.4
                                Floor layers................    9.0-10.5
                                Glaziers....................    9.1-11.1

[[Page 35]]

 
                                Lathers.....................    9.3-10.6
                                Marble, tile and terrazzo        8.3-9.9
                                 workers and helpers.
                                Millwrights.................    9.1-10.3
                                Painters....................   11.0-13.5
                                Pipefitters.................   10.0-12.0
                                Plasterers..................  8.7 to 9.6
                                Plumbers....................   10.0-12.7
                                Sheetmetal workers..........   10.1-11.3
                                All other...................   11.0-11.8
------------------------------------------------------------------------

                           cleveland, oh, area

    Area covered-- Ashland, Ashtabula, Crawford, Cuyahoga, Erie, Geauga, 
Huron, Lake, Lorain, Sandusky, and Seneca Counties, OH.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Art glass workers...........   25.4-28.6
                                Asbestos workers............   20.9-23.9
                                Boilermakers................   16.3-18.9
                                Bricklayers.................   28.8-29.5
                                Carpenters..................     8.0-8.6
                                Cement masons...............   41.1-42.2
                                Electricians................   15.1-18.1
                                Elevator constructors.......   28.9-32.5
                                Glaziers....................   35.8-40.0
                                Ironworkers.................   11.4-13.2
                                Painters....................   17.7-18.4
                                Pipefitters.................   15.7-17.9
                                Plasterers..................   21.6-23.2
                                Plumbers....................   20.8-23.4
                                Roofers.....................   28.9-31.8
                                All other...................   17.0-18.8
------------------------------------------------------------------------

                            dayton, oh, area

    Area covered-- Greene, Miami, Montgomery, and Preble Counties, OH.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   10.6-11.8
------------------------------------------------------------------------

                           detroit, mi., area

    Area covered-- Wayne, Oakland, and Macomb Counties, MI.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Electricians................   17.0-19.0
                                Operating engineers.........   16.9-18.0
                                Lathers.....................   18.6-19.6
                                Painters....................   15.0-17.7
                                Riggers.....................   16.8-17.7
                                Roofers.....................   15.3-16.6
                                Tile, terrazzo marble          15.0-17.8
                                 workers.
                                Tile and marble helpers.....   16.0-18.5
                                Terrazzo helpers............   17.8-19.5
                                All other...................   18.6-20.4
------------------------------------------------------------------------

                          evansville, in, area

    Area covered-- Vanderburgh County, IN.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     6.3-7.6
------------------------------------------------------------------------

                          fort wayne, in, area

    Area covered-- Adams, Allen, DeKalb, Huntington, LaGrange, Noble, 
Steuben, Wells, and Whitley Counties, IN.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Plumbers....................     5.2-5.5
                                Steamfitters................     5.2-5.5
                                Carpenters..................     5.7-5.2
                                Bricklayers.................    9.3-10.4
                                Electricians................     5.2-5.9
                                Sheetmetal workers..........     4.4-5.2
                                Ironworkers.................     7.3-8.4
                                Operating engineers.........     5.2-6.0
                                Painters....................   11.0-12.0
                                All other...................     7.1-8.0
------------------------------------------------------------------------

                         indianapolis, in, area

    Area covered-- Marion County, IN.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............   32.2-37.7
                                Bricklayers.................   17.4-19.5
                                Electricians................     6.6-7.8
                                Elevator constructors.......   15.5-18.0
                                Glaziers....................   25.2-28.6
                                Ironworkers.................   11.6-14.0
                                Lathers.....................   21.1-22.0
                                Operating engineers.........     7.7-8.8
                                Painters....................   22.4-25.0
                                Plasterers..................   27.5-30.4
                                Plumbers....................   25.5-30.0
                                Roofers.....................   15.9-18.1
                                Sheetmetal workers..........    9.3-10.9
                                Steamfitters................   14.9-17.1
                                All other...................   14.1-16.2
------------------------------------------------------------------------

                            peoria, il, area

    Area covered-- Peoria, Fulton, Tazewell, Woodford, Knox, Stark, 
Marshall, Hancock,

[[Page 36]]

Mason, McLean, McDonough, Henderson, Warren, Livingston, Bureau, Henry, 
and Putnam Counties, IL.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     5.0-6.0
------------------------------------------------------------------------

                           rockford, il, area

    Area covered-- Boone, Winnebago, Stephenson, De Kalb, Ogle, Lee, and 
Jo Daviess Counties; Cherry Grove, Shannon, Rock Creek, Lima, Wysox, and 
Elkhorn Townships in Carroll County; Genesee, Jordan, Hopkins, Sterling, 
Hume, Montmorency, Tampico, and Hahnaman Townships in Whiteside County, 
IL.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   10.0-12.0
------------------------------------------------------------------------

                          south bend, in, area

    Area covered-- St. Joseph, County, IN.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................    8.0-10.0
------------------------------------------------------------------------

                            toledo, oh, area

    Area covered-- Defiance, Fulton, Hancock, Henry, Lusas, Ottawa, 
Williams, and Wood Counties, OH.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   10.7-12.3
------------------------------------------------------------------------

                           youngstown, oh area

    Area covered--Columbiana, Mahoning, and Trumbull Counties, OH; and 
Lawrence and Mercer Counties, PA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     6.0-7.1
------------------------------------------------------------------------

                                Region VI

                            el paso, tx, area

    Area covered--El Paso County, TX.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   55.1-66.2
------------------------------------------------------------------------

                            lawton, ok, area

    Area covered--Commanche County, OK.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   15.8-16.8
------------------------------------------------------------------------

                          little rock, ar, area

    Area covered--Pulaski County, AR.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   25.6-30.6
------------------------------------------------------------------------

                            new orleans, la.

    Area covered--Parishes of Orleans, Jefferson, St. Bernard, St. 
Tammany, St. Charles, St. John, Lafourche, Plaquemines, Washington, 
Terrebonne, Tangipahoa,\1\ Livingston,\2\ and St. James.\3\
---------------------------------------------------------------------------

    \1\ Area covered is east of the Illinois Central RR.
    \2\ Area covered is southeast of the line from a point off the 
Livingston and Tangipahoa Parish line adjacent from New Orleans and 
Baton Rouge.
    \3\ Area covered is southeast of a line drawn from the town of 
Gramercy to the point of intersection of St. James, Lafourche, and 
Assumption Parishes.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       20-23
------------------------------------------------------------------------

                                tulsa, ok

    Area covered--Tulsa, Creek, Mayes, Rogers, Okfuskee, Washington, 
Nowata, Craig, Ottawa, Delaware, Okmulgee (northern half), dividing line 
Highway 16; Osage (eastern half), dividing line Highway 18; Pawnee 
(eastern half), and Payne (eastern half) Counties, OK.

[[Page 37]]



                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Bricklayers.................   24.0-25.0
                                Carpenters..................   17.0-18.0
                                Cement masons...............   21.5-22.5
                                Floor covers................   12.0-14.0
                                Glaziers, glass workers.....   14.7-17.3
                                Operating engineers.........   22.0-24.0
                                Painters....................   18.0-20.0
                                Pipefitters.................   10.0-12.0
                                Plumbers....................   11.6-13.2
                                Roofers.....................   12.0-14.0
                                Sheetmetal workers..........    8.0-10.0
                                All other trades............   12.0-14.4
------------------------------------------------------------------------

                               Region VII

                        kansas city (ks) and (mo)

    Area covered--Clay, Platte, Jackson, Bates, Carroll, Lafayette, Ray, 
Johnson, Henry, and Cass Counties, Mo., and Wyandotte, Johnson, and 
Miami Counties, KS.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............   10.3-11.7
                                Boilermakers................     5.9-6.4
                                Bricklayers.................   19.4-20.7
                                Carpenters..................     5.9-6.9
                                Carpet, linoleum and             5.5-6.4
                                 resilient floor decorators.
                                Cement masons...............   25.5-26.5
                                Elevator constructors.......    9.2-10.7
                                Electricians................     8.0-9.4
                                Glaziers....................      9.8 to
                                                                    10.5
                                Lathers.....................   14.5-15.6
                                Marble masons, tile layers       7.5-9.0
                                 and terrazzo workers.
                                Marble and tile helpers.....     4.8-5.6
                                Operating engineers.........    9.0-10.9
                                Painters....................   14.3-15.0
                                Pipefitters.................     6.9-7.7
                                Plasterers..................   19.0-20.4
                                Plumbers....................     8.3-9.3
                                Roofers.....................   14.0-15.0
                                Sheetmetal workers..........     7.0-8.0
                                Teamsters...................   25.0-26.0
                                All other trades............   11.4-12.5
------------------------------------------------------------------------

                                omaha, ne

    Area covered--Sharpy and Douglas Counties, NE, Council Bluffs, IA 
(city limits only).

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................    9.0-10.0
------------------------------------------------------------------------

                              st. louis, mo

    Area covered--City of St. Louis, Mo., and St. Louis, MO.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............     5.2-5.7
                                Boilermakers................   34.0-37.7
                                Bricklayers.................   12.6-14.2
                                Carpenters..................     8.2-8.9
                                Cement and concrete            13.3-16.6
                                 finishers.
                                Electricians................   13.6-16.1
                                Elevator constructors.......     8.7-9.3
                                Glaziers....................   28.7-34.5
                                Ironworkers.................    9.0-10.4
                                Lathers and plasterers......   24.2-29.7
                                Operating engineers.........   13.2-15.7
                                Painters and paperhangers...   25.1-29.3
                                Plumbers and pipefitters....   13.2-15.4
                                Roofers and slaters.........   17.1-19.6
                                Sheetmetal workers..........   22.5-27.0
                                Tilesetters and terrazzo        8.8-10.4
                                 workers.
------------------------------------------------------------------------

                               topeka, ks

    Area covered--Shawnee County, KS.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................    8.8-10.5
------------------------------------------------------------------------

                               Region VIII

                                colorado

    Area covered--State of Colorado

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       13-14
------------------------------------------------------------------------

                                Region IX

                        alameda county, ca, area

    Area covered--Alameda County, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   28.5-33.0
------------------------------------------------------------------------

                                 arizona

    Area covered-- State of Arizona.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   25.0-30.0
------------------------------------------------------------------------


[[Page 38]]

                         contra costa county, ca

    Area covered: Contra Costa County, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   17.0-19.5
------------------------------------------------------------------------

                            fresno county, ca

    Area covered.-- Fresno, Madera, Kings, and Tulare Counties, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   20.0-27.0
------------------------------------------------------------------------

                              las vegas, nv

    Area covered.-- Area of jurisdiction of the Building & Construction 
Trades Council of Clark, Lincoln, Nye and Esmeralda Counties, NV.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............   17.7-20.2
                                Bricklayers.................   18.8-21.3
                                Carpenters..................   16.2-17.5
                                Glaziers, floorcoverers,       16.3-17.7
                                 painters, tapers and
                                 wallcoverers.
                                Plasterers..................   24.6-27.2
                                Plumbers and pipefitters....   15.2-16.2
                                Sheet metal workers.........   16.2-17.7
                                Wood, wire and metal lathers   18.1-19.3
                                All other trades............   18.0-19.5
------------------------------------------------------------------------

                         los angeles county, ca

    Area covered.-- Area of jurisdiction of the Los Angeles Building & 
Construction Trades Council.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   21.7-25.1
------------------------------------------------------------------------

                              monterey, ca

    Area covered.-- Monterey County, CA, and within the jurisdiction of 
the Monterey County Building & Construction Trades Council, AFL-CIO.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   27.0-29.8
------------------------------------------------------------------------

                              north bay, ca

    Area covered.-- Solano, Napa, Lake, Marin, Mendocino, and Sonoma 
Counties.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   10.5-12.6
------------------------------------------------------------------------

                             sacramento, ca

    Area covered.-- Sacramento, Yolo, Amador, Placer, El Dorado, Nevada, 
and Sierra Counties, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   17.5-20.0
------------------------------------------------------------------------

                          san diego county, ca

    Area covered.-- San Diego County, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   24.0-30.0
------------------------------------------------------------------------

                    san francisco city and county, ca

    Area covered.-- City and County of San Francisco, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Electricians................        17.0
                                Plumbers, pipefitters and           14.0
                                 steamfitters.
                                Structural metal workers....        20.0
                                Sheet metal workers.........        19.0
                                Asbestos workers............        40.0
------------------------------------------------------------------------

                          san mateo county, ca

    Area covered.-- San Mateo County, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   12.0-14.0
------------------------------------------------------------------------


[[Page 39]]

                         santa clara county, ca

    Area covered.-- Santa Clara County, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   18.0-21.7
------------------------------------------------------------------------

                          santa cruz county, ca

    Area covered.-- Santa Cruz County, CA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   17.0-20.4
------------------------------------------------------------------------

                                Region X

                                 alaska

    Area covered.-- State of Alaska.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Asbestos workers............   26.4-28.0
                                Carpenters..................   25.7-28.0
                                Electricians................   25.7-28.0
                                Ironworkers.................   25.7-28.0
                                Operating engineers.........   26.1-28.0
                                Painters....................   25.8-28.0
                                Pile drivers................   25.1-28.0
                                Plumbers and steamfitters...   25.4-28.0
                                Roofers.....................   27.6-28.0
                                Sheetmetal workers..........   25.6-28.0
                                Teamsters...................   25.6-28.0
                                All other...................   26.1-28.1
------------------------------------------------------------------------

                                pasco, wa

    Area covered.-- The area of jurisdiction of the Southeastern 
Washington Building & Construction Trades Council as follows: all of 
Benton, Franklin, and Walla Walla Counties, Grant County to Highway 2 
and the southwest corner of Adams County, WA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  Boilermakers................   12.5-15.0
                                Bricklayers.................   11.0-13.5
                                Carpenters..................    9.8-12.3
                                Cement finishers............   11.5-14.0
                                Electricians................   10.0-12.5
                                Ironworkers.................   10.0-12.5
                                Operating engineers.........   10.2-12.7
                                Painters....................   10.0-12.5
                                Plumbers and fitters........     .9-12.4
                                Sheetmetal workers..........   10.8-13.3
                                Laborers....................    9.5-13.3
                                All other...................   10.0-12.5
------------------------------------------------------------------------

                              portland, or

    Area covered-- Multnomah, Clackamas, and Washington Counties, OR.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................     5.5-6.5
------------------------------------------------------------------------

                               seattle, wa

    Area covered--King County, WA.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................    8.8-11.5
------------------------------------------------------------------------

                               spokane, wa

    Area covered--Washington Counties: Spokane, Whitman, Lincoln, Adams, 
Stevens, Pend Oreille, Columbia, Garfield, Asotin, Ferry, Okanogan, 
Chelan, Douglas and Grant (north of Highway 2), and in connection with 
Indian employment, parts of any other counties included in reservations 
incorporating portions of the above area; Idaho: Boundary, Bonner, 
Kootenai, Shoshone, Benewah, Latah, Clearwater, Nez Perce, Lewis, and 
Idaho, and in connection with Indian employment, any other territory 
included in reservations, part of which are in the above counties.

                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................       (\1\)
------------------------------------------------------------------------
\1\ 2.0 and above.

                               tacoma, wa

    Area covered-- Pierce, Thurston, Mason, Lewis, Grays Harbor, and 
Pacific Counties, WA.

[[Page 40]]



                          Goals and Timetables
                              [In percent]
------------------------------------------------------------------------
           Timetable                        Trade                Goal
------------------------------------------------------------------------
Until further notice..........  All.........................   12.2-15.0
------------------------------------------------------------------------


[43 FR 58357, Dec. 14, 1978]

Exhibit E to Subpart E of Part 1901--List of Regional Offices, Office of 
 Federal Contract Compliance Programs (OFCCP), U.S. Department of Labor 
                                 (USDL)

Region I (ME, NH, VT, MA, RI, CT)
    Associate Regional Administrator, USDL/OFCCP, JFK Building, Room 
1612-C, Government Center, Boston, MA 12203, (617) 223-4232.

Region II (NY, NJ, PR, VI)
    Associate Regional Administrator, USDL/OFCCP, 1515 Broadway, Room 
3306, New York, NY 10036, (212) 662-5563.

Region III (PA, MD, DE, VA, WV, DC)
    Associate Regional Administrator, USDL/OFCCP, Gateway Building, Room 
15434, 3535 Market Street, Philadelphia, PA 19104, (215) 596-1213.

Region IV (NC, SC, KY, TN, MS, AL, GA, FL)
    Associate Regional Administrator, USDL/OFCCP, 1371 Peachtree Street, 
NE, Room 729, Atlanta, GA 30309, (402) 881-4211).

Region V (OH, IN, MI, IL, WI, MN)
    Associate Regional Administrator, USDL/OFCCP, New Federal Building, 
16th Floor, 2340 South Dearborn Street, Chicago, IL 60604, (312) 353-
8887.

Region VI (LA, AR, OK, TX, NM)
    Associate Regional Administrator, USDL/OFCCP), 555 Griffin Square 
Building, Room 506, Dallas, TX 75202, (214) 767-4771.

Region VII (MO, IA, NE, KS)
    Associate Regional Administrator, USDL/OFCCP Regional Administrator, 
Federal Office Building, Room 2000, 911 Walnut Street, Kansas City, MO 
64106, (816) 374-5384.

Region VIII (ND, SD, MT, WY, CO, UT)
    Associate Regional Administrator, USDL/OFCCP, 14431 Federal Office 
Building, 1961 Stout Street, Denver, CO 80202, (303) 837-5011.

Region IX (CA, NV, AZ, HI, GU)
    Associate Regional Administrator, USDL/OFCCP, Federal Office 
Building, Room 10341, 450 Golden Gate, San Francisco, CA 94102, (415) 
556-3597.

Region X (WA, OR, ID)
    Associate Regional Administrator, USDL/OFCCP, Federal Office 
Building, 909 First Avenue, Room 4095, Seattle, WA 98174, (206) 442-
4508.

[44 FR 24852, Apr. 27, 1979]

Subpart F--Procedures for the Protection of Historical and Archeological 
                               Properties

    Authority: 16 U.S.C. 470; 7 U.S.C. 1989; 42 U.S.C. 1480; 42 U.S.C. 
2942; 5 U.S.C. 301; sec. 10, Pub. L. 93-357, 88 Stat. 392; delegation of 
authority by Sec. of Agri., 7 CFR 2.23; delegation of authority by the 
Asst. Sec. for Rural Development, 7 CFR 2.70; delegations of authority 
by Dir., OEO, 29 FR 14764, 33 FR 9850.

    Source: 42 FR 62141, Dec. 9, 1977, unless otherwise noted.

Sec. 1901.251  Purpose.

    This subpart prescribes Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 policies, procedures, and 
guidelines for compliance with section 106 of the National Historic 
Preservation Act of 1966 (Pub. L. 89-665), the Reservoir Salvage Act of 
1960 (Pub. L. 86-523), as amended May 24, 1974, by the Archeologic and 
Historic Preservation Act (Pub. L. 93-291), and section 1(3) of 
Executive Order 11593.

Sec. 1901.252  Policy.

    (a) The FmHA or its successor agency under Public Law 103-354 
recognizes that significant scientific, prehistorical, historical and 
archeological (HA) resources are an important part of our National 
Heritage.
    (b) The FmHA or its successor agency under Public Law 103-354 will 
consult with appropriate Federal, State, and local Agencies; other 
organizations; the State Historic Preservation Officer (SHPO) and 
individuals to assess the impact of any proposed FmHA or its successor 
agency under Public Law 103-354 undertaking on properties having 
historical or archeological significance in order to avoid or mitigate 
any adverse effects on the properties.
    (c) The procedures in this subpart have been developed in accordance 
with section 1(3) of Executive Order 111593.

Sec. 1901.253  Definitions.

    (a) Undertaking means any new or continuing projects or program 
activities supported in whole or in part through FmHA or its successor 
agency under Public Law 103-354 contracts, grants, subsidies, loans, or 
other forms of funding assistance. This does not include any actual 
construction by FmHA or its successor agency under Public Law 103-354.
    (b) National Historic Preservation Act. The National Register means 
the National Register of Historic Places, which is a register of 
districts, sites, buildings, structures, and objects, significant in 
American history, architecture, archeology, and culture maintained by 
the Secretary of the Interior under the

[[Page 41]]

authority of section 2(b) of the Historic Sites Act of 1935 and section 
101(a)(1) of the National Preservation Act. The National Register is 
published in its entirety in the Federal Register each year in February. 
Addenda are published on the first Tuesday of each month.
    (c) National Register Property means a district, site, building, 
structure, or object included in the National Register.
    (d) Property eligible for inclusion in the National Register means 
any district, site, building, structure, or object which the Secretary 
of the Interior determines is likely to meet the National Register 
criteria.
    (e) State Historic Preservation Officer (SHPO) means the official 
within each State, designated by the Governor at the request of the 
Secretary of the Interior, to administer the National Register and 
historic preservation grants program and to coordinate preservation 
planning within the State.
    (f) Criteria of effect means when any condition of an undertaking 
causes or may cause any change, beneficial or adverse, in the 
scientific, historical, architectural, archeological, or cultural 
character of a National Register property that qualifies the property 
under the National Register criteria.
    (g) Historical and archeological assessment means a determination by 
the FmHA or its successor agency under Public Law 103-354 State Director 
using the criteria of effect as a guide, as to whether a proposed 
undertaking may have an effect upon any properties located within the 
project area which are included or eligible for inclusion in the 
National Register.
    (h) National Register criteria means the following criteria 
established by the Secretary of the Interior for use in evaluating and 
determining the eligibility of properties for listing in the National 
Register: The quality of significance in American History, Architecture, 
Archeology, and the culture is present in districts, sites, buildings, 
structures, and objects of State and local importance, that possess 
integrity of location, design, setting, materials, workmanship, feeling, 
and association; and
    (1) That are associated with events that have made a significant 
contribution to the broad patterns of our history; or
    (2) That are associated with the lives of persons significant in our 
past; or
    (3) That embody the distinctive characteristics of a type, period, 
or method of construction, or that represent the work of a master, or 
that possess high artistic values, or that represent a significant and 
distinguishable entity whose components may lack individual distinction; 
or
    (4) That have yielded, or may be likely to yield, information 
important in prehistory or history.
    (i) FmHA or its successor agency under Public Law 103-354 official 
means the FmHA or its successor agency under Public Law 103-354 County 
Supervisor, the FmHA or its successor agency under Public Law 103-354 
State Director or his designated representative.
    (j) Project area means those geographical or legally defined areas 
directly under or to be under the applicants control that are affected 
by the undertaking such as building sites, easements, rights-of-way, 
leasehold interests and those areas which are directly and significantly 
impacted by the undertaking.
    (k) Advisory council means the Advisory Council on Historic 
Preservation, Suite 430, 1522 K Street NW., Washington, DC 20005, 
created by title II of Pub. L. 89-665 and charged with the 
responsibility of advising the President, Congress, and others on 
matters relating to historic preservation.
    (l) HA as used in this regulation is an abbreviation of the term 
``scientific, prehistorical, historical, and archeological.''

Sec. 1901.254  Scope.

    FmHA or its successor agency under Public Law 103-354 will evaluate 
all undertakings for possible HA significance. This subpart covers the 
following types of undertakings:
    (a) Undertakings requiring a historical and archeological 
assessment. Although the following undertakings are presumed to involve 
nonfederally owned lands, they may have an effect on properties having 
HA significance and, therefore, will require a historical and 
archeological assessment:
    (1) Loans and grants for the development of business and industry 
including guaranteed loans.
    (2) Loans and grants for multiple family housing projects of 25 or 
more dwelling units.
    (3) Subdivision plans submitted for approval having 25 or more 
building sites.
    (4) Loans and grants in rural areas to construct, enlarge, extend, 
or otherwise improve:
    (i) Community water, sanitary sewage, solid waste disposal, and 
storm waste water disposal systems.
    (ii) Other essential community facilities such as fire and rescue, 
health, safety, public buildings, schools, transportation, traffic, and 
law enforcement.
    (5) Loans to develop community irrigation, drainage, and other soil 
and water conservation and use facilities.
    (6) Loans to acquire and develop grazing land for livestock of an 
association of members.
    (7) Loans in areas designated by the Soil Conservation Service 
(SCS), U.S. Department of Agriculture (USDA), to conserve and develop 
natural resources and to contribute to economic improvement of the area.
    (8) Loans to protect and develop land and water resources in small 
watersheds.

[[Page 42]]

    (9) Loans to permit Indian tribes to buy land within their 
reservations.
    (b) Undertakings presumed not to require a historical and 
archeological assessment. The following undertakings are generally 
presumed to involve nonfederally owned lands and not to have an effect 
on properties of historical and archeological value and will therefore 
not usually require a historical and archeological assessment. However, 
when the State Director or County Supervisor finds or has had 
communication or obtains information from a recognized historical and 
archeological authority that a specific undertaking may have an effect 
on a property included or eligible for inclusion in the National 
Register, a historical and archeological assessment will be made.
    (1) Loans to farmers and ranchers in rural areas for the purchase, 
development, and operation of farms and ranches.
    (2) Loans to individual families in rural areas for the purchase, 
construction, or improvement of single family residences.
    (3) Loans and grants for multiple family housing projects of not 
more than 24 family dwelling units.
    (4) Subdivision plans submitted for approval having 24 or less 
building sites.
    (5) Loans to farmers, ranchers, and other rural residents to develop 
land, water, and other related resources for increased production of 
food and other crops, improved pastures, feed crops, water facilities 
for livestock, and improved habitats for fish and wildlife.
    (6) Emergency and disaster loans to farmers, ranchers and other 
rural residents in declared or designated areas as a result of a major 
or national disaster.

Sec. 1901.255  Historical and archeological assessments.

    (a) The FmHA or its successor agency under Public Law 103-354 
official, normally the FmHA or its successor agency under Public Law 
103-354 County Supervisor, who receives a preapplication or application 
for loan or grant assistance on an undertaking that may have an effect 
on HA properties will, as part of the process, take the following 
actions:
    (1) Carefully review the State supplements issued by the State 
Director pursuant to Sec. 1901.262(a) to determine whether there are any 
properties within the project area that appear in the National Register.
    (2) Document the following:
    (i) A brief narrative report of the findings and conclusions of an 
on-site reconnaissance of the project area.
    (ii) Any ``in-house'' knowledge of known or suspected HA sites in 
the project area.
    (3) Submit the information outlined in paragraph (a)(2) of this 
section to the FmHA or its successor agency under Public Law 103-354 
State Director as part of the preapplication or application.
    (b) Upon receipt of the preapplication/application the FmHA or its 
successor agency under Public Law 103-354 State Director will, as a 
concurrent part of the preapplication/application review, prepare a 
historical and archeological assessment of the undertaking. In making 
the assessment the State Director will consider information from the 
following sources:
    (1) State and Regional Clearinghouse comments.
    (2) Information submitted by the County Supervisor pursuant to 
paragraph (a)(2) of this section.
    (3) Factual comments or recommendations of the SHPO or other 
responsible Federal, State, or local officials.
    (4) Any other reliable information concerning properties in the 
project area having HA significance.
    (c) Upon completion of the preapplication or application review, the 
State Director will take the following actions:
    (1) When his assessment indicates that no properties of HA 
significance will be effected by the proposed undertaking, he will 
proceed with processing of the preapplication or application.
    (2) When his assessment indicates that there are properties included 
in the National Register that may be effected by the proposed 
undertaking, he will in consultation with the SHPO, the applicant and 
its representatives, and other appropriate historical and archeological 
authorities plan appropriate measures to avoid or mitigate any adverse 
effects. He will also notify the Advisory Council and Secretary of the 
Interior of the proposed undertaking, and of its possible effect on the 
National Register properties and provide them with a copy of the 
proposed plan in order to afford them a reasonable opportunity for 
comment. Comments that are received with 45 calendar days of 
notification in accordance with the requirements for comment as outlined 
in section 106 of the National Historic Preservation Act of 1966, will 
be considered in further development of the undertaking.
    (3) When his assessment indicates that there are properties thay may 
be eligible for inclusion in the National Register, based on his 
application of the National Register criteria, he will request the 
Regional Director of the National Park Service, U.S. Department of the 
Interior, Attention: Interagency Archeological Services, in writing, to 
cause a survey of the project area to be made to determine the 
significance of the properties in accordance with section 3(b) of Pub. 
L. 93-291. The State Director's letter to the Regional Director should 
request a response within 45 calendar days as to whether the National 
Park Service intends to cause a survey to be made, declines to undertake 
a

[[Page 43]]

survey, or that a survey is not warranted based on available data. The 
addresses of the Regional Offices of the National Park Service are 
listed in exhibit A of this subpart. If no response is received within 
the 45-day period, the State Director will proceed as outlined in 
paragraph (c)(7) of this section.
    (4) The State Director will cooperate fully with the National Park 
Service in the conduct of a survey should one be undertaken to assure 
that:
    (i) The professional archeologist/historian conducting the survey 
provides his written opinion as to the eligibility of any identified 
properties for inclusion in the National Register.
    (ii) When the professional archeologist/historian recommends 
recovery, protection, or preservation of identified properties, the 
National Park Service is requested to undertake this project.
    (5) When the survey made in paragraph (c)(3) of this section does 
not identify any historical and archeological properties that may be 
eligible for inclusion in the National Register, or the National Park 
Service is not going to undertake activity pursuant to paragraph 
(c)(4)(ii) of this section, the State Director, after consultation with 
the SHPO and the National Park Service, will document the findings and 
proceed with processing of the application.
    (6) When the survey identifies properties that may be eligible for 
inclusion in the National Register, the State Director will request the 
SHPO to proceed with the nomination of such properties. The State 
Director will then proceed as outlined in paragraph (c)(2) of this 
section for any properties accepted for inclusion in the National 
Register.
    (7) When the National Park Service declines to cause a survey to be 
made or determines that one is not warranted, the State Director will 
document such facts and proceed with processing of the application.

Secs. 1901.256-1901.258  [Reserved]

Sec. 1901.259  Actions to be taken when archeological properties are 
          discovered during construction.

    (a) When properties of significant HA value are discovered during 
construction, the State Director will immediately consult with the 
applicant, the SHPO and the Regional Director of the National Park 
Service to determine whether there is sufficient factual evidence to 
warrant a decision to stop construction and undertake detailed survey 
and recovery.
    (b) When the consultations in paragraph (a) of this section result 
in a determination by the National Park Service to request the applicant 
to stop construction, such stop action should be taken so that the Park 
Service can initiate measures for immediate recovery within 60 days 
after notification of a discovery.
    (c) When the consultations in paragraph (a) of this section do not 
result in a determination by the National Park Service to stop 
construction and to undertake a survey and recovery, construction should 
be permitted to proceed with caution. In the event that the National 
Park Service determines that recovery is necessary, the FmHA or its 
successor agency under Public Law 103-354 applicant/borrower and the 
Park Service should determine that the consent of all persons, 
associations, or public entities having legal interests in the property 
involved has been secured. Also, the applicant should be informed that 
the Secretary of the Interior is authorized to compensate any person, 
association, or public entity damaged as a result of delay in 
construction or as a result of the temporary loss of the use of public 
or any nonfederally owned land.
    (d) No survey or recovery work will be required which in the 
determination of the State Director would seriously impede FmHA or its 
successor agency under Public Law 103-354 actions in providing 
assistance where the State Director determines that immediate action is 
required to avoid loss or damage of life or property. Nevertheless, 
appropriate measures will be taken to the extent practical to preserve, 
protect, or mitigate any damage to properties having HA significance.

Sec. 1901.260  Coordination with other agencies.

    (a) When other Agencies are directly involved in any undertaking 
that requires a historical and archeological assessment, the State 
Director will contact the Agencies concerned to determine if a joint 
assessment will be prepared and whether a single lead Agency will assume 
primary responsibility for preparing the assessment.
    (b) When a lead Agency is agreed upon other than FmHA or its 
successor agency under Public Law 103-354, FmHA or its successor agency 
under Public Law 103-354 will provide that Agency with information about 
its respective areas of responsibility. Assessments will indicate Agency 
participation and concurrence.
    (c) When FmHA or its successor agency under Public Law 103-354 
program activities are planned that primarily supplement those of the 
SCS, USDA, such as watershed projects, resource conservation and 
development measures, and irrigation and drainage projects, the SCS will 
be designated as the lead Agency.

Sec. 1901.261  [Reserved]

Sec. 1901.262  State supplement.

    (a) The State Director shall be responsible for preparing a list of 
all properties included

[[Page 44]]

in the National Register in his area of jurisdiction and issuing such 
list as a part of a State supplement. Such a list will be updated as 
needed to reflect changes in the National Register.
    (b) State Directors may also supplement this subpart and its exhibit 
as appropriate to meet State and local laws and regulations.

    Exhibit A to Subpart F of Part 1901--National Park Service, U.S. 
               Department of the Interior Regional Offices

    Contact should be made to: Chief, Interagency Archeological Services 
Division, Office of Archeological and Historic Preservation, National 
Park Service.
    The three Regional Offices are:

San Francisco Office: Old Post Office Building, Mission and 7th Streets, 
Post Office Box 5700, San Francisco, Calif. 94104.
    States covered: Arizona, Utah, Idaho, and West, including Hawaii and 
Alaska. Attention: Mr. Garland Gordon. Telephone: 415-556-7711.
Denver Office: 1978 South Garrison Street, Denver, Colo. 80225.
    States covered: Wisconsin, Iowa, Missouri, Oklahoma, Texas and West 
to San Francisco area. Attention: Mr. Jack R. Rudy. Telephone: 303-234-
2560.
Atlanta Office: 730 Peachtree Street, Atlanta, Ga. 30308.
    States covered: All others East of Denver area. Attention: Mr. 
Wilford Susted. Telephone: 404-526-2611.

Subparts G-J [Reserved]



    Subpart K--Certificates of Beneficial Ownership and Insured Notes

    Authority: 7 U.S.C. 1989; 42 U.S.C. 1480; delegation of authority by 
the Secretary of Agriculture, 7 CFR 2.23; delegation of authority by the 
Assistant Secretary for Rural Development, 7 CFR 2.70.

    Source: 41 FR 51799, Nov. 24, 1976, unless otherwise noted.



Sec. 1901.501  Purpose.

    This subpart prescribes policies and procedures for Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
certificates of beneficial ownership and insured notes.



Sec. 1901.502  Policy.

    It is the current policy to sell all certificates of beneficial 
ownership to the Federal Financing Bank for financing activities from 
the Agricultural Credit Insurance Fund and the Rural Development 
Insurance Fund. Sales from the Rural Housing Insurance Fund will be made 
to the Federal Financing Bank to the extent necessary to service 
certificates of beneficial ownership held by the Federal Financing Bank. 
Sales in excess of those needed for servicing requirements will be made 
to the public. In addition to sales, this subpart provides policy for 
the servicing of outstanding certificates of beneficial ownership, 
insurance contracts, and insured notes held by investors.

[51 FR 24301, July 3, 1986]



Sec. 1901.503  Definitions.

    (a) As used in Secs. 1901.505, 1901.507, 1901.508 and 1901.509 the 
following definitions will apply:
    (1) Announcement of sale. Any notice of terms and conditions 
respecting a sale of certificates.
    (2) Certificate. A certificate of beneficial ownership issued by 
Farmers Home Administration (FmHA) or its successor agency under Public 
Law 103-354 under this subpart.
    (3) Director, Finance Office. The Director or the Insured Loan 
Officer of the Finance Office of FmHA or its successor agency under 
Public Law 103-354.
    (4) FmHA or its successor agency under Public Law 103-354. The 
United States acting through the Farmers Home Administration or its 
successor agency under Public Law 103-354.
    (5) Finance Office. The office which maintains the FmHA or its 
successor agency under Public Law 103-354 finance records. It is located 
at 1520 Market Street, St. Louis, Missouri 63103. (Phone: 314-425-4400)
    (6) Fixed period. Any time interval (preceding an option period) 
during which the insured holder is not entitled to require FmHA or its 
successor agency under Public Law 103-354 to purchase the insured note, 
as specified in the insurance agreement.
    (7) Insurance agreement. The entire contract evidencing and setting 
forth the terms and conditions of FmHA or its successor agency under 
Public Law 103-354 insurance of the payment for

[[Page 45]]

the insured note. The insurance agreement with respect to any particular 
loan may be evidenced by Form FmHA or its successor agency under Public 
Law 103-354 440-5, ``Insurance Endorsement (Insured Loan),'' FmHA or its 
successor agency under Public Law 103-354 440-30, ``Insurance 
Endorsement (Insured Loans),'' or any other form or forms prescribed by 
the National Office and executed by an authorized official of FmHA or 
its successor agency under Public Law 103-354. It may include such 
provisions as, for example, an agreement of FmHA or its successor agency 
under Public Law 103-354 to purchase or repurchase the loan, or to make 
supplementary payments from the insurance fund.
    (8) Insurance fund. The Agricultural Credit Insurance Fund 
authorized by section 309 of the Consolidated Farm and Rural Development 
Act, the Rural Development Insurance Fund authorized by section 309A of 
the Consolidated Farm and Rural Development Act, or the Rural Housing 
Insurance Fund authorized by section 517 of title V of the Housing Act 
of 1949.
    (9) Insured holder. The current owner of an insured note other than 
FmHA or its successor agency under Public Law 103-354, according to the 
records of FmHA or its successor agency under Public Law 103-354 is 
insurer of the note.
    (10) Insured note. Any promissory note or bond evidencing an insured 
loan regardless of whether it is held by FmHA or its successor agency 
under Public Law 103-354 in the insurance fund, by a private holder, or 
by FmHA or its successor agency under Public Law 103-354 as trustee.
    (11) Loan. Loans made and held in the Agricultural Credit Insurance 
Fund, Rural Development Insurance Fund, or the Rural Housing Insurance 
Fund.
    (12) National Office. The Administrator or other authorized officer 
of the FmHA or its successor agency under Public Law 103-354 in 
Washington, DC.
    (13) Option period. Any period during which the insured holder has 
the optional right to require the FmHA or its successor agency under 
Public Law 103-354 to purchase the insured note, as specified in the 
insurance agreement.
    (14) Par value. The total amount to which the insured holder is 
entitled under the terms of the insurance agreement.
    (15) Private buyer. A buyer of an insured note other than FmHA or 
its successor agency under Public Law 103-354.
    (16) Private holder. An insured holder other than FmHA or its 
successor agency under Public Law 103-354.
    (17) Repurchase agreement. A provision in the insurance agreement 
obligating FmHA or its successor agency under Public Law 103-354 to buy 
the insured note at the option of the holders.
    (18) Sale, or seller, and buyer. The transfer of ownership 
(including possession or the right of possession), the transferor, and 
the transferee respectively.
    (19) State Director. The State Director of FmHA or its successor 
agency under Public Law 103-354 for the State in which is located the 
real estate improved, purchased, or refinanced with the loan evidenced 
by the insured note.
    (b) As used in Sec. 1901.506 the following definitions will apply:
    (1) Reserve bank. The Federal Reserve Bank of New York (and any 
other Federal Reserve Bank which agrees to issue securities in book-
entry form) as fiscal agent of the United States acting on behalf of 
FmHA or its successor agency under Public Law 103-354 and, when 
indicated, acting in its individual capacity.
    (2) FmHA or its successor agency under Public Law 103-354 security. 
A certificate representing beneficial ownership of notes, bonds, 
debentures, or other similar obligations held by FmHA or its successor 
agency under Public Law 103-354 under the Consolidated Farm and Rural 
Development Act and title V of the Housing Act of 1949, issued in the 
form of a definitive FmHA or its successor agency under Public Law 103-
354 security or a book-entry FmHA or its successor agency under Public 
Law 103-354 security.
    (3) Definitive FmHA or its successor agency under Public Law 103-354 
security. An FmHA or its successor agency under Public Law 103-354 
security in engraved on printed form.

[[Page 46]]

    (4) Book-entry FmHA or its successor agency under Public Law 103-354 
security. An FmHA or its successor agency under Public Law 103-354 
security in the form of an entry made as prescribed in this subpart on 
the records of a Reserve bank.
    (5) Pledge. A pledge of, or any other security interest in, FmHA or 
its successor agency under Public Law 103-354 securities as collateral 
for loans or advances, or to secure deposits of public moneys or the 
performance of an obligation.
    (6) Date of call. The date fixed in the official notice of call 
published in the Federal Register on which FmHA or its successor agency 
under Public Law 103-354 will make payment of the security before 
maturity in accordance with its terms.
    (7) Member bank. Any national bank, state bank, or bank or trust 
company which is a member of a Reserve bank.



Sec. 1901.504  Authorities and responsibilities.

    The Administrator will approve all methods of FmHA or its successor 
agency under Public Law 103-354 financing and major changes in existing 
methods. The Director, Finance Office, is responsible for servicing of 
all certificates of beneficial ownership and insured notes issued by the 
Finance Office, the Federal Reserve Bank of New York for the servicing 
of insurance contracts, and the Federal Reserve banks for certificates 
of beneficial ownership for which the Reserve banks are FmHA or its 
successor agency under Public Law 103-354's fiscal agents.



Sec. 1901.505  Certificates of beneficial ownership in FmHA or its successor agency under Public Law 103-354 loans.

    (a) Special trust of loans--(1) Establishment of special trusts. 
From time to time FmHA or its successor agency under Public Law 103-354 
will place in special trusts unmature loans evidenced by notes or other 
instruments. Loans may be placed into or removed from a special trust, 
but there will always be maintained in such trusts loans on which the 
unpaid amount is at least equal to the face value of the outstanding 
unmature certificates evidencing beneficial ownership in such special 
trust as provided in paragraph (a)(2) of this section.
    (2) Beneficial ownership of special trusts. To permit interested 
persons to acquire a beneficial ownership of loans comprising a special 
trust established under paragraph (a)(1) of this section, FmHA or its 
successor agency under Public Law 103-354 will sell certificates which 
will evidence beneficial ownership of an interest in the special trust 
to the extent of the face value of such certificates. FmHA or its 
successor agency under Public Law 103-354 will own an interest in 
special trusts equal to the amount by which the unpaid principal amount 
of loans comprising the trusts exceeds the face value of all outstanding 
certificates evidencing beneficial ownership in such trusts.
    (b) Sale of certificates. FmHA or its successor agency under Public 
Law 103-354 will offer certificates for sale from time to time on such 
terms and conditions it may deem appropriate. Sales made by the Finance 
Office shall be made by its Director. No sale in excess of $1 million 
will be made to any one investor without prior approval of the Associate 
Administrator or his designee. The terms and limitations of sales are 
subject to change from time to time, and may be obtained from the 
Finance Office.
    (1) Form of certificates. The certificates may be interest-bearing 
or non-interest-bearing. The certificates may be made payable to the 
bearer or registered holder thereof, and will be negotiable. The 
certificates will be issued in denominations specified in the 
invitations for bid or other announcement of sale.
    (2) Issue date and maturity date of certificates. The certificates 
will be issued on such dates and mature on such dates as specified in 
the invitation for bids or other announcement of sale. Such dates will 
appear on the face of the certificates.



Sec. 1901.506  Book-entry procedure for FmHA or its successor agency under Public Law 103-354 securities--issuance and redemption of certificate by Reserve 
          bank.

    (a) Authority of Reserve bank. Each Reserve bank is hereby 
authorized in

[[Page 47]]

accordance with the provisions of this subpart to:
    (1) Issue book-entry FmHA or its successor agency under Public Law 
103-354 securities by means of entries on its records which shall 
include the name of the depositor, the amount, the securities title (or 
series) and maturity date.
    (2) Effect conversions between book-entry FmHA or its successor 
agency under Public Law 103-354 securities and definitive FmHA or its 
successor agency under Public Law 103-354 securities.
    (3) Otherwise service and maintain book-entry FmHA or its successor 
agency under Public Law 103-354 securities.
    (4) Issue a confirmation of transaction in the form of a written 
advice (serially numbered or otherwise) which specifies the amount and 
description of any securities (that is, the securities title (or series) 
and the maturity date) sold or transferred and the date of the 
transaction.
    (b) Scope and effect of book-entry procedure. (1) A Reserve bank as 
fiscal agent of the United States acting on behalf of FmHA or its 
successor agency under Public Law 103-354 may apply the book-entry 
procedure provided for in this subpart to any FmHA or its successor 
agency under Public Law 103-354 securities which have been or are 
hereafter deposited for any purpose in accounts with it in its 
individual capacity under terms and conditions which indicate that the 
Reserve bank will continue to maintain such deposit accounts in its 
individual capacity, notwithstanding application of the book-entry 
procedure to such securities. This paragraph shall be applicable but not 
limited to FmHA or its successor agency under Public Law 103-354 
securities deposited:
    (i) As collateral pledged to a Reserve bank (in its individual 
capacity) for advances by it.
    (ii) By a member bank for its sole account.
    (iii) By a member bank held for the account of its customers.
    (iv) In connection with deposits in a member bank of funds of 
States, Municipalities, or other political subdivisions.
    (v) In connection with the performance of an obligation or duty 
under Federal, State, Municipal, or local law, or judgments or decrees 
of courts.
    (2) The application of the book-entry procedure under paragraph 
(b)(1) of this section shall not detract from or adversely affect the 
relationships that would otherwise exist between a Reserve bank in its 
individual capacity and its depositors concerning any deposit under this 
paragraph. Whenever the book-entry procedure is applied to such FmHA or 
its successor agency under Public Law 103-354 securities, the Reserve 
bank is authorized to take all action necessary in respect of the book-
entry procedure to enable such Reserve bank in its individual capacity 
to perform its obligation as depositary with respect to such FmHA or its 
successor agency under Public Law 103-354 securities.
    (3) A Reserve bank as fiscal agent of the United States acting on 
behalf of FmHA or its successor agency under Public Law 103-354 may 
apply the book-entry procedure to FmHA or its successor agency under 
Public Law 103-354 securities deposited as collateral pledged to the 
United States under Treasury Department Circular Nos. 92 and 176, both 
as revised and amended, and may apply the book-entry procedure, with the 
approval of the Secretary of the Treasury, to any other FmHA or its 
successor agency under Public Law 103-354 securities deposited with a 
Reserve bank as fiscal agent of the United States.
    (4) Any person having an interest in FmHA or its successor agency 
under Public Law 103-354 securities which are deposited with a Reserve 
bank (in either its individual capacity or as fiscal agent of the United 
States) for any purpose shall be deemed to have consented to their 
conversion to book-entry FmHA or its successor agency under Public Law 
103-354 securities pursuant to the provisions of this subpart and in the 
manner and under the procedure prescribed by the Reserve bank.
    (5) No deposits shall be accepted under this section on or after the 
date of maturity or call of FmHA or its successor agency under Public 
Law 103-354 securities.

[[Page 48]]

    (c) Transfer or pledge. (1) A transfer or pledge of book-entry FmHA 
or its successor agency under Public Law 103-354 securities to a Reserve 
bank (in its individual capacity or as fiscal agent of the United 
States), or to the United States, or to any transferee or pledgee 
eligible to maintain an appropriate book-entry account in its name with 
a Reserve bank under this subpart is effected and perfected, 
notwithstanding any provision of law to the contrary, by a Reserve bank 
making an appropriate entry in its records of the securities transferred 
or pledged. The making of such an entry in the records of a Reserve bank 
shall:
    (i) Have the effect of a delivery in bearer form of definitive FmHA 
or its successor agency under Public Law 103-354 securities.
    (ii) Have the effect of a taking of delivery by the transferee or 
pledgee.
    (iii) Constitute the transferee or pledgee a holder.
    (iv) If a pledge, effect a perfected security interest therein in 
favor of the pledgee. A transfer or pledge of book-entry FmHA or its 
successor agency under Public Law 103-354 securities effected under this 
paragraph shall have priority over any transfer, pledge, or other 
interest, theretofore or thereafter effected or perfected under 
paragraph (c)(2) of this section or any other manner.
    (2) A transfer or pledge of transferable FmHA or its successor 
agency under Public Law 103-354 securities, or any interest therein, 
which is maintained by a Reserve bank (in its individual capacity or as 
fiscal agent of the United States) in a book-entry account under this 
subpart, including securities in book-entry form under 
Sec. 1901.506(b)(1)(iii) is effected, and a pledge is perfected by any 
means that would be effective under applicable law to effect a transfer 
or to effect and perfect a pledge of FmHA or its successor agency under 
Public Law 103-354 securities, or any interest therein, if the 
securities were maintained by the Reserve bank in bearer definitive 
form. For purposes of transfer or pledge hereunder, book-entry FmHA or 
its successor agency under Public Law 103-354 securities maintained by a 
Reserve bank shall, notwithstanding any provision of law to the 
contrary, be deemed to be maintained in bearer definitive form. A 
Reserve bank maintaining book-entry FmHA or its successor agency under 
Public Law 103-354 securities, either in its individual capacity or as 
fiscal agent of the United States, is not a bailee for the purposes of 
notification of pledges of these securities under this paragraph, or a 
third person in possession for the purposes of acknowledgment of 
transfers thereof under this paragraph. Where transferable FmHA or its 
successor agency under Public Law 103-354 securities are recorded on the 
books of a depositary (a bank, banking institution, financial firm, or 
similar party, which regularly accepts in the course of its business 
FmHA or its successor agency under Public Law 103-354 securities as a 
custodial service for customers, and maintains accounts in the names of 
such customers reflecting ownership of or interest in such securities) 
for account of the pledgor or transferor thereof and such securities are 
on deposit with a Reserve bank in a book-entry account hereunder, such 
depositary shall, for purposes of perfecting a pledge of such securities 
or effecting delivery of such securities to a purchaser under applicable 
provisions of law, be the bailee to which notification of the pledge of 
the securities may be given or the third person in possession from which 
acknowledgment of the holding of the securities for the purchaser may be 
obtained. A Reserve bank will not accept notice or advice of a transfer 
or pledge effected or perfected under this paragraph and any such notice 
or advice shall have no effect. A Reserve bank may continue to deal with 
its depositor in accordance with the provisions of this subpart, 
notwithstanding any transfer or pledge effected or perfected under this 
paragraph.
    (3) No filing or recording with a public recording office or officer 
shall be necessary or effective with respect to any transfer or pledge 
of book-entry FmHA or its successor agency under Public Law 103-354 
securities or any interest therein.
    (4) A Reserve bank shall, upon receipt of appropriate instructions, 
convert book-entry FmHA or its successor

[[Page 49]]

agency under Public Law 103-354 securities into definitive FmHA or its 
successor agency under Public Law 103-354 securities and deliver them in 
accordance with such instructions. No such conversion shall affect 
existing interest in such FmHA or its successor agency under Public Law 
103-354 securities.
    (5) A transfer of book-entry FmHA or its successor agency under 
Public Law 103-354 securities within a Federal Reserve Bank shall be 
made in accordance with procedures established by the Reserve bank not 
inconsistent with this subpart. The transfer of book-entry FmHA or its 
successor agency under Public Law 103-354 securities by a Reserve bank 
may be made through a telegraphic transfer procedure.
    (6) All requests for transfer or withdrawal must be made prior to 
the maturity or date of call of the securities.
    (d) Withdrawal of FmHA or its successor agency under Public Law 103-
354 securities. (1) A depositor of book-entry FmHA or its successor 
agency under Public Law 103-354 securities may withdraw them from a 
Reserve bank by requesting delivery of like definitive FmHA or its 
successor agency under Public Law 103-354 securities to itself or on its 
order to a transferee.
    (2) FmHA or its successor agency under Public Law 103-354 securities 
which are actually to be delivered upon withdrawal may be issued in 
bearer or registered form.
    (e) Delivery of FmHA or its successor agency under Public Law 103-
354 securities. A Reserve bank which has received FmHA or its successor 
agency under Public Law 103-354 securities and effected pledges, made 
entries regarding them, or transferred or delivered them according to 
the instructions of its depositor is not liable for conversion or for 
participation in breach of fiduciary duty even though the depositor had 
no right to dispose of or take other action in respect of the 
securities. A Reserve bank shall be fully discharged of its obligations 
under this subpart by the delivery of FmHA or its successor agency under 
Public Law 103-354 securities in definitive form to its depositor or 
upon the order of such depositor. Customers of a member bank or other 
depositary (other than a Reserve bank) may obtain FmHA or its successor 
agency under Public Law 103-354 securities in definitive form only by 
causing the depositor of the Reserve bank to order the withdrawal 
thereof from the Reserve bank.
    (f) Registered securities. (1) No formal assignment shall be 
required for the conversion to book-entry FmHA or its successor agency 
under Public Law 103-354 securities of registered FmHA or its successor 
agency under Public Law 103-354 securities held by a Reserve bank (in 
either its individual capacity or as fiscal agent of the United States) 
on the effective date of this subpart for any purpose specified in 
Sec. 1901.506(b)(1). Registered FmHA or its successor agency under 
Public Law 103-354 securities deposited thereafter with a Reserve bank 
for any purpose specified in Sec. 1901.506(b) shall be assigned for 
conversion to book-entry FmHA or its successor agency under Public Law 
103-354 securities.
    (2) The assignment which shall be executed in accordance with the 
provisions of subpart F of 31 CFR part 306, so far as applicable, shall 
be to Federal Reserve Bank of ------, as fiscal agent of the United 
States acting on behalf of the Farmers Home Administration or its 
successor agency under Public Law 103-354, United States Department of 
Agriculture, for conversion to book-entry Farmers Home Administration or 
its successor agency under Public Law 103-354 securities.
    (g) Servicing book-entry FmHA or its successor agency under Public 
Law 103-354 securities, payment of interest, payment at maturity or upon 
call. Interest becoming due on book-entry FmHA or its successor agency 
under Public Law 103-354 securities shall be charged to the general 
account of the Treasurer of the United States on the interest due date 
and remitted or credited in accordance with the depositor's 
instructions. Such securities shall be redeemed and charged to the same 
account on the date of maturity or call, and the redemption proceeds, 
principal, and interest shall be disposed of in accordance with the 
depositor's instructions.
    (h) Issuance and redemption. (1) In those instances where the 
Reserve bank is acting as fiscal agent of the

[[Page 50]]

United States acting on behalf of FmHA or its successor agency under 
Public Law 103-354, the following subparts of Treasury Department 
Circular No. 300 (31 CFR part 306), so far as applicable, shall apply to 
such certificates.
    (i) Subpart B, Registration.
    (ii) Subpart C, Transfers, Exchanges and Reissues.
    (iii) Subpart D, Redemption or Payment.
    (iv) Subpart E, Interest.
    (v) Subpart G, Assignments of Registered Securities--General.
    (vi) Subpart F, Assignments by or in Behalf of Individuals.
    (vii) Subpart H, Assignments in Behalf of Estates of Deceased 
Owners.
    (viii) Subpart I, Assignments by or in Behalf of Trustees and 
Similar Fiduciaries.
    (ix) Subpart J, Assignments in Behalf of Private or Public 
Organizations.
    (x) Subpart K, Attorneys in Fact.
    (xi) Subpart L, Transfer Through Judicial Proceedings.
    (xii) Subpart M, Requests for Suspension of Transactions.
    (xiii) Subpart N, Relief for Loss, Theft, Destruction, Mutilation, 
or Defacement of Securities.



Sec. 1901.507  Certificates of beneficial ownership issued by the FmHA or its successor agency under Public Law 103-354 Finance Office.

    (a) Orders and payment. Orders for investment in certificates may be 
placed with the Finance Office by mail, telephone, or in person. Payment 
for purchase of certificates may be made by a wire transfer to the 
Federal Reserve Bank of St. Louis for credit to the Farmers Home 
Administration or its successor agency under Public Law 103-354, by a 
certified check or bank draft payable to the Farmers Home Administration 
or its successor agency under Public Law 103-354. The rate of interest 
paid on the certificate will be the rate in effect on the date the 
Finance Office receives the payment.
    (b) Registration. (1) The registration used must express the actual 
ownership of a certificate and may not restrict the authority of the 
owner to dispose of it in any manner. FmHA or its successor agency under 
Public Law 103-354 reserves the right to treat the registration as 
conclusive ownership. Request for registration must be clear, accurate, 
and complete, and include the appropriate taxpayer identifying number or 
social security number.
    (2) The registration of all certificates owned by the same person, 
organization, or fiduciary should be uniform with respect to the name of 
the owner and, in case of fiduciary, the description of the fiduciary 
capacity. Individual owners should be designated by the names by which 
they are ordinarily known or under which they do business, preferably 
including at least one full given name. The name of an individual may be 
preceded by an applicable title, as, for example ``Mrs.'' ``Mr.'', 
``Miss',' ``Ms.''; ``Dr.'', or ``Rev.'', or followed by a designation 
such as ``M.D.'', ``D.D.'', ``Sr.'', or ``Jr.'', Any other similar 
suffix should be included when ordinarily used or when necessary to 
distinguish the owner from another member of his family. The address 
should include, where appropriate, the name and street, route, or any 
other location feature, and zip code.
    (3) If an erroneously inscribed certificate is received, it should 
not be altered in any respect. FmHA or its successor agency under Public 
Law 103-354 should be given full particulars about the error and asked 
to furnish instructions.
    (c) Transfers and exchanges--closed periods--(1) General. Transfer 
of registered certificates should be made by assignment in accordance 
with this section. Registered securities are eligible for denominational 
exchange. Specific instructions for issuance and delivery of new 
certificates signed by the owner or the owner's authorized 
representative must accompany the certificates presented. Certificates 
presented for transfer must be received by FmHA or its successor agency 
under Public Law 103-354 not less than 1 full month before the date on 
which they mature. Any certificates so presented which are received too 
late to comply with this provision will be accepted for payment only.
    (2) Closing of transfer books. The transfer books are closed for 1 
full month preceding interest payment dates. If the date set for closing 
falls

[[Page 51]]

on Saturday, Sunday, or a legal holiday, the books will be closed as of 
the close of business on the last business day preceding that date. The 
books are reopened on the first business day following the date on which 
interest falls due. Registered certificates which have not matured, or 
have been submitted for transfer and are received when the books are 
closed for that certificate, will be processed on or after the date such 
books are reopened. If certificates are received for transfer when the 
books are closed for payment of final interest at maturity, the 
following action will be taken in the absence of different instructions:
    (i) Payment of final interest will be made to the registered owner 
of record on the date the books were closed.
    (ii) Payment of principal will be made to the assignee under a 
proper assignment of the certificate.
    (d) Redemption or payment--(1) General. Certificates are payable in 
regular course of business at maturity. FmHA or its successor agency 
under Public Law 103-354 may provide for the exchange of maturing 
certificates. The registered certificates should be presented and 
surrendered for redemption at the FmHA or its successor agency under 
Public Law 103-354 Finance Office. No assignments or evidence in support 
of them will be required by or on behalf of the registered owner or 
assignee for redemption for his or its account, or for redemption-
exchange if the new certificates are to be registered in exactly the 
same names and forms as in the registrations or assignments of the 
certificates surrendered.
    (2) Redemption at maturity. Registered certificates presented and 
surrendered for redemption at maturity need not be assigned unless the 
owner desires that payment be made to some other person. Should the 
owner so desire assignments should be made to the ``Farmers Home 
Administration or its successor agency under Public Law 103-354 for 
redemption for the account of (inserting name and address of person to 
whom payment is to be made).'' Specific instructions for the issuance 
and delivery of the redemption check signed by the owner or the owner's 
authorized representative must accompany the certificates unless 
included in the assignment. Payment of the principal and interest will 
be made by a check drawn on the Treasurer of the United States to the 
order of the person entitled and mailed in accordance with the 
instructions received. If instructions are not received concerning 
interest, interest will be paid to the registered owner.
    (3) Interest. The interest on FmHA or its successor agency under 
Public Law 103-354 certificates accrues and is payable annually. A full 
interest period does not include the day on which the last preceding 
interest became due, but does include the day on which the next 
succeeding interest payment is due. Certificates will cease to bear 
interest on the date of their maturity. The interest on registered 
certificates is payable by checks drawn on the Treasurer of the United 
States to the order of the registered owners, except as otherwise 
provided in this section. FmHA or its successor agency under Public Law 
103-354 prepares the interest checks in advance of the interest payment 
date and ordinarily mails them in time to reach the addressees on that 
date. Interest on a registered certificate which has not matured and 
which is presented for any transaction when the books for that 
certificate are closed will be paid by check drawn to the order of the 
registered owner of record. On receipt of notice of the death or 
incompetency of an individual named as registered owner, a change in the 
name or in the status of a partnership, corporation, or unincorporated 
association, the removal, resignation, succession, or death of a 
fiduciary or trustee, delivery of interest checks will be withheld 
pending receipt and approval of evidence showing who is entitled to 
receive the interest checks. If the inscriptions on certificates do not 
clearly identify the owners, delivery of interest checks may be withheld 
pending reissue of the certificates in the correct registration, except 
as provided in this section. The final installment of interest will be 
paid by check drawn to the order of the registered owner of record on 
presentation and surrender of the certificate for redemption. To assure 
timely delivery of interest checks, owners should promptly notify FmHA 
or its successor agency under Public Law 103-354 of any change of 
address.

[[Page 52]]

    (e) Assignments. Assignments of certificates should be executed by 
the owner or the owner's authorized representative in the presence of an 
officer authorized to certify assignments. Assignments shall be made on 
the back of the certificate. Registered certificates may be assigned to 
a specified transferee or to FmHA or its successor agency under Public 
Law 103-354 for redemption or for exchange for other certificates 
offered at maturity. Assignments to ``United States, Farmers Home 
Administration or its successor agency under Public Law 103-354,'' 
``Farmers Home Administration or its successor agency under Public Law 
103-354 for Transfer,'' or ``Farmers Home Administration or its 
successor agency under Public Law 103-354 for Exchange'' will not be 
accepted unless supplemented by specific instructions by or in behalf of 
the owner. If an alteration or erasure has been made in an assignment, a 
new assignment from the assignor should be obtained. Otherwise, an 
affidavit or explanation by the person responsible for the alteration or 
erasure should be submitted for consideration.
    (f) Death of certificate holder. The Finance Office should be 
notified of the death of the registered owner of a certificate. The 
following documents should be forwarded with the notice if available.
    (1) A certified copy of the death certificate.
    (2) A certified copy of the court order appointing the Administrator 
or Executor (include the mailing address of the Administrator or 
Executor). The Finance Office will notify the person submitting such 
notice and/or documentation if any other records or documents are 
needed. Legal opinions and advice will be obtained by the Finance Office 
as needed from the Regional Attorney. After all legal requirements are 
met, the certificate should be reissued in the name of the current 
owner.
    (g) Replacement. Lost, stolen, destroyed, or mutilated certificates 
will be replaced by the Finance Office on the registered owner's 
compliance with the requirements of Sec. 1901.509.



Sec. 1901.508  Servicing of insured notes outstanding with investors.

    The Director, or the insured loan officer of the Finance Office, is 
authorized in connection with the sale of any insured note to execute 
required documents on behalf of FmHA or its successor agency under 
Public Law 103-354 and to take other appropriate action, including, but 
not limited to, acknowledging notice of sale of an insured note, or 
requiring an insured holder to sell an insured note to FmHA or its 
successor agency under Public Law 103-354 in connection with any 
voluntary conveyance or foreclosure, or transfer related to liquidation 
of the borrower's account or any other servicing action so related. Upon 
recommendation by the State Director that purchase of an insured note is 
necessary for any servicing action not related to liquidation of the 
borrower's account, authorization may be given by the National Office to 
request the Director, Finance Office, to require a holder to sell an 
insured note to FmHA or its successor agency under Public Law 103-354.
    (a) Assignments--(1) Effective date of assignment. When an insured 
note is sold by a private holder to a private buyer, notice of such sale 
executed by the seller must be given to and acknowledged by FmHA or its 
successor agency under Public Law 103-354 in order for the sale to be 
binding on FmHA or its successor agency under Public Law 103-354, as to 
FmHA or its successor agency under Public Law 103-354, the effective 
date of the sale will be the acknowledgment date specified in the 
acknowledgement of notice executed by FmHA or its successor agency under 
Public Law 103-354.
    (2) Assignment to FmHA or its successor agency under Public Law 103-
354 at request of FmHA or its successor agency under Public Law 103-354. 
At any time FmHA or its successor agency under Public Law 103-354 
considers it necessary for proper servicing of the loan, FmHA or its 
successor agency under Public Law 103-354 may require, in writing, a 
private holder to sell an insured note to FmHA or its successor agency 
under Public Law 103-354.
    (3) Assignment to FmHA or its successor agency under Public Law 103-
354 at option of holder. A private holder at any

[[Page 53]]

time during the option period may require, in writing, FmHA or its 
successor agency under Public Law 103-354 to purchase an insured note.
    (4) Price. If FmHA or its successor agency under Public Law 103-354 
is the buyer of an insured note, the price will be the par value as of 
the effective date of the sale. In other cases, the price will be 
determined by an agreement between the parties.
    (b) Sale of insured notes by private holders to private buyers. (1) 
On receipt of notice from a private holder of intention to assign an 
insured note, the Director, Finance Office, will send the holder:
    (i) Form FmHA or its successor agency under Public Law 103-354 471-7 
``Notice and Acknowledgment of Sale of Insured or Guaranteed Loan.''
    (ii) A statement of the unpaid principal. If requested the Director, 
Finance Office, will furnish a statement of account instead of or in 
addition to a statement of the unpaid principal.
    (iii) Appropriate information on how to complete the assignment.
    (2) If the Director, Finance Office, is informed that an insured 
note has been assigned and FmHA or its successor agency under Public Law 
103-354 is requested to recognize the assignment, the Director, Finance 
Office, will send the assignor Form FmHA or its successor agency under 
Public Law 103-354 471-7, with directions for its execution.
    (3) On receipt of Form FmHA or its successor agency under Public Law 
103-354 471-7 properly executed by the assignor, the Director, Finance 
Office, will complete and execute the acknowledgment section of the 
form. The Director, Finance Office, will retain the original of the 
form, have two facsimile copies made and send one to the assignor, and 
one to the assignee. For any correction or other change to be made in 
the record of the name or address of a private holder, or of a 
designated agent of a private holder, a request will be made to FmHA or 
its successor agency under Public Law 103-354 in writing.
    (4) As of the date of the acknowledgment, executed by the Director, 
Finance Office, on Form FmHA or its successor agency under Public Law 
103-354 471-7 the Director, Finance Office, will transfer the insured 
note from the assignor to the assignee as the insured holder on the 
records of FmHA or its successor agency under Public Law 103-354. The 
name and address of the assignee will be recorded by FmHA or its 
successor agency under Public Law 103-354 exactly as they appear on Form 
FmHA or its successor agency under Public Law 103-354 471-7.
    (5) Payments transmitted by FmHA or its successor agency under 
Public Law 103-354 on or after the acknowledgment date shown on Form 
FmHA or its successor agency under Public Law 103-354 471-7 will be 
transmitted to the assignee. The Director, Finance Office, will give 
notice to the assignor and the assignee of any payments transmitted by 
FmHA or its successor agency under Public Law 103-354 to the assignor 
before the acknowledgment date and after either the date of sale, or the 
date of the statement of account, whichever is earlier. However, FmHA or 
its successor agency under Public Law 103-354 will not be liable for any 
failure to give such notice.
    (c) Assignment of insured notes to FmHA or its successor agency 
under Public Law 103-354--(1) Assignment at the request of the holder. 
For assignment of an insured note to FmHA or its successor agency under 
Public Law 103-354 during the option period at the request of the 
holder, the following procedure will apply:
    (i) The holder will endorse the insured note as follows: ``Pay to 
the order of the United States of America. Without recourse.'' The 
holder will then deliver the endorsed note, together with the insurance 
agreement, to the Director, Finance Office.
    (ii) On receipt of the endorsed note with the accompanying insurance 
agreement, the Director, Finance Office, will acknowledge receipt of the 
note and process payment to the assignor of the par value of the note as 
of the date of the Treasury check.
    (2) Assignment at the request of FmHA or its successor agency under 
Public Law 103-354. The procedure for assigning an insured note at the 
request of FmHA or its successor agency under Public Law 103-354 will be 
the same as that prescribed in paragraph (c)(1) of this section, except 
that the Director, Finance

[[Page 54]]

Office, will send a written request to the holder requiring that the 
insured note be assigned to FmHA or its successor agency under Public 
Law 103-354 and delivered to the Director, Finance Office, with the 
accompanying insurance agreement. The Director, Finance Office, will 
explain that the assignment is necessary to enable FmHA or its successor 
agency under Public Law 103-354 to service the account properly and will 
give the holder all necessary information as to the manner of making the 
assignment and the amount to be paid by FmHA or its successor agency 
under Public Law 103-354.
    (d) Replacement of called or fully paid notes. Certain insurance 
endorsements contain a clause or rider providing for a replacement note 
when the original note is paid in full, or is called by FmHA or its 
successor agency under Public Law 103-354. This provision applies to 
loans sold for a fixed period of 10 years or longer for loans sold on or 
after December 1, 1969, and a fixed period of 15 years or longer for 
loans sold before December 1, 1969. If a note is paid in full or called 
by the Government and the lender is entitled to a replacement note, the 
lender may obtain a certificate of beneficial ownership in lieu of the 
replacement note. The certificate will carry the rates and terms 
applicable to the replacement note.
    (e) Death of a noteholder. The Finance Office should be notified of 
the death of a holder of an insured note. The following documents should 
be forwarded with the notice if available:
    (1) A certified copy of the death certificate.
    (2) A certified copy of the court order appointing the Administrator 
or Executor (include the mailing address of the Administrator or 
Executor). The Finance Office will notify the person submitting the 
notice and/or documentation if any other records or documents are 
needed, and will provide any additional instructions that are needed. 
Legal opinions and advice will be obtained by the Finance Office as 
needed from the Regional Attorney.



Sec. 1901.509  Loss, theft, destruction, mutilation, or defacement of insured notes, insurance contracts, and certificates of beneficial ownership.

    (a) Block sale insurance contracts. The Associate Administrator is 
authorized in connection with block sale insurance contracts to 
authorize the FmHA or its successor agency under Public Law 103-354's 
fiscal agent to establish requirements for issuance of a replacement 
insurance contract when the original issued by the Federal Reserve Bank 
of New York (FmHA or its successor agency under Public Law 103-354's 
fiscal agent) is lost, stolen, destroyed, mutilated, or defaced. When a 
block sale insurance contract is lost, stolen, or destroyed, a duplicate 
may be issued to the registered holder upon receipt of an acceptable 
certificate of loss and an indemnity bond without surety. The 
certificate of loss should include the legal name and present address of 
the owner and address when issued, if different from the present 
address; the capacity of person certifying, if other than owner; the 
identity of the insurance contract, including series number, contract 
number, denomination, issue date, and form of inscription of registry, 
and the full statement of circumstances of loss. All available portions 
of an insurance contract that is mutilated, defaced, or partially 
destroyed should be submitted to the Federal Reserve Bank of New York 
(FmHA or its successor agency under Public Law 103-354's fiscal agent) 
for determination as to whether a duplicate insurance contract can be 
issued without a certificate of loss and posting of an indemnity bond. 
In the event the holder of a block sales insurance contract obtains 
possession of the underlying notes, the requirements of paragraph (b) of 
this section apply.
    (b) Notes and certificates of beneficial ownership sold by County 
Office and Finance Office. The Director, or the insured loan officer of 
the Finance Office, is authorized on behalf of the Government, in 
connection with insured notes or certificates of beneficial ownership 
sold through the FmHA or its successor agency under Public Law 103-354 
Finance Office to require indemnity

[[Page 55]]

bonds from a noteholder when a note or certificate is lost, stolen, 
destroyed, mutilated, or defaced while in the custody of the holder or 
his designee. When a note or certificate of beneficial ownership is 
lost, stolen, or destroyed while in the custody of the holder or his 
designee, the following will apply:
    (1) A certificate of loss should be filed with FmHA or its successor 
agency under Public Law 103-354 Finance Office. The certificate should 
include:
    (i) Legal name and present address of owner when issued, if 
different from present address.
    (ii) Capacity of person certifying, if other than the owner.
    (iii) Identity of the note or certificate of beneficial ownership, 
including the name and FmHA or its successor agency under Public Law 
103-354 case number of the maker thereof, issue date, interest rate of 
obligation, face amount of note or certificate of beneficial ownership, 
and a full description of any assignment, endorsement, or any other 
writing.
    (iv) A full statement of circumstances of the loss, theft, or 
destruction of the note.
    (2) An indemnity bond in the amount of the unpaid principal and 
interest will be required except in the following instances:
    (i) Substantially the entire note or certificate of beneficial 
ownership is presented and surrendered by the owner or holder, and the 
Director, Finance Office, is satisfied as to the identity of the 
instruments and that any missing portions are not sufficient to form the 
basis of a valid claim against the United States or the borrower; or
    (ii) The owner or holder is the United States, a Federal Reserve 
Bank, a Federal Government Corporation, a State or territory, or the 
District of Columbia.
    (3) An indemnity bond without surety will be provided in the 
following cases:
    (i) Cases involving registered unassigned obligations held by banks, 
trust companies, savings and loan associations, or companies holding 
certificates of authority from Secretary of the Treasury as acceptable 
sureties on Federal Bonds (companies listed on Treasury Department 
Circular 570) where the financial responsibilities of such claimants are 
well known or readily ascertainable.
    (ii) Cases involving registered unassigned obligations where the 
evidence reasonably justifies a conclusion that the obligations were 
destroyed and the unpaid principal and interest amount does not exceed 
$1,000.
    (4) An indemnity posted with a qualified surety is required in all 
cases involving registered unassigned obligations other than those cited 
in paragraphs (b)(2)(i), (b)(2)(ii), (b)(3)(i) and (b)(3)(ii) of this 
section. A qualified surety is a company holding a certificate of 
authority from the Secretary of the Treasury as acceptable sureties on 
Federal Bonds, and listed in Treasury Department Circular 570.
    (5) All indemnity bonds for notes must be payable to both the 
borrower and FmHA or its successor agency under Public Law 103-354. All 
indemnity bonds for certificates of beneficial ownership must be payable 
to FmHA or its successor agency under Public Law 103-354. The bond may 
be posted at the time the note or certificate of beneficial ownership 
becomes eligible for repurchase by FmHA or its successor agency under 
Public Law 103-354. If the holder desires to continue to hold the note 
for the life of the note, an indemnity bond will not be required.
    (6) An assignment of the note or certificate of beneficial ownership 
shall be made to the United States of America, acting through the 
Farmers Home Administration or its successor agency under Public Law 
103-354, United States Department of Agriculture. An acceptable form of 
assignment is available from the Director, Finance Office.
    (c) Other cases. Cases involving bearer obligations and other cases 
not discussed in this section will be forwarded to the Director, Finance 
Office, for requirements.
    (d) Replacement of notes. FmHA or its successor agency under Public 
Law 103-354 will not attempt to obtain replacement notes from borrowers.

Subparts L-M [Reserved]

[[Page 56]]



                   Subpart N--Indian Outreach Program

    Authority: 7 U.S.C. 1989; 42 U.S.C. 1480; 42 U.S.C. 2942; 5 U.S.C. 
301; sec. 10, Pub. L. 93-357, 88 Stat. 392; delegation of authority by 
the Sec. of Agri., 7 CFR 2.23, delegation of authority by the Asst. Sec. 
for Rural Development, 7 CFR 2.70; delegation of authority by Dir., OEO, 
29 FR 14764, 33 FR 9850.

    Source: 43 FR 3697, Jan. 27, 1978, unless otherwise noted.



Sec. 1901.651  Purpose.

    The purpose of this subpart is to establish procedures and 
responsibilities for carrying out the Farmers Home Administration (FmHA) 
or its successor agency under Public Law 103-354 American Indian 
Outreach Program.



Sec. 1901.652  Goals.

    The FmHA or its successor agency under Public Law 103-354 American 
Indian Outreach Program is a concerted effort to:
    (a) Make all FmHA or its successor agency under Public Law 103-354 
programs more accessible and available to Indians living on and off 
reservations.
    (b) Surface and attempt to correct problems and obstacles that 
prevent the participation by eligible Indians and Indian tribes in FmHA 
or its successor agency under Public Law 103-354 programs.
    (c) Increase the production level of FmHA or its successor agency 
under Public Law 103-354 loans and grants going to American Indians both 
on and off reservations.
    (d) Provide pamphlets, publications and information on FmHA or its 
successor agency under Public Law 103-354 programs to individual 
Indians, Indian tribes and Tribal leaders, Bureau of Indian Affairs 
(BIA) personnel, and other interested groups and individuals.



Sec. 1901.653  Field action.

    State Coordinators of Indian activities appointed by State Directors 
will:
    (a) Maintain close liaison with local FmHA or its successor agency 
under Public Law 103-354 supervisors and officials serving Indian 
Populations and reservations;
    (b) Work closely with local District, State, and National Office 
representatives to remove obstacles and solve problems that impede the 
use of FmHA or its successor agency under Public Law 103-354 programs on 
Indian reservations;
    (c) Be familiar with all FmHA or its successor agency under Public 
Law 103-354 loan and grant programs available to Indians living on and 
off reservations, including the types of security and eligibility 
requirements;
    (d) Be aware of any unique relationship that may exist between 
Indians and the Federal and State governments affecting Indian 
participation in the FmHA or its successor agency under Public Law 103-
354 loan and grant programs;
    (e) As necessary, attend pertinent meeting of Indian groups, 
government agencies, and others concerned with economic and social 
development of Indians;
    (f) If possible, become personally acquainted with Indian leaders 
and non-Indians leaders in Indian affairs in the State;
    (g) Arrange for the training of members of Indian tribes, 
individuals, and interested groups involved in Indian affairs, in the 
packaging and distribution of materials for use in FmHA or its successor 
agency under Public Law 103-354 loan and grant programs.



Sec. 1901.654  FmHA or its successor agency under Public Law 103-354 publications.

    FmHA or its successor agency under Public Law 103-354 publications, 
such as ``Rural Credit for American Indians,'' a handbook of FmHA or its 
successor agency under Public Law 103-354 programs, and ``FmHA or its 
successor agency under Public Law 103-354 Credit for American Indians,'' 
or other materials to be developed, will be used as supplementary 
training and informational aids for Indian communities, individuals, 
governmental agencies, and other groups involved in Indian affairs.



Sec. 1901.655  Reports.

    (a) State Directors will keep the National Office advised of any 
problems and obstacles in FmHA or its successor agency under Public Law 
103-354's procedures relating to Indian laws or customs that cannot be 
resolved locally

[[Page 57]]

and which prevent American Indians from participating in the FmHA or its 
successor agency under Public Law 103-354 programs on or off the 
reservations.
    (b) Any changes in personnel serving as State Coordinator of Indian 
activities will be reported to the National Office.
    (c) Each State Director will make a semi-annual memorandum report on 
January 1 and July 1 of each year on activities and accomplishments in 
his State. The report will specifically reflect what has been done to 
carry out the items set forth in Sec. 1901.653. The report will be sent 
to the National Office, Attention, Coordinator of Indian Activities.



PART 1902--SUPERVISED BANK ACCOUNTS--Table of Contents




         Subpart A--Disbursement of Loan, Grant, and Other Funds

Sec.
1902.1  General.
1902.2  Policies concerning disbursement of funds.
1902.3  Procedures to follow in fund disbursement.
1902.4  Establishing MFH reserve accounts in a supervised bank account.
1902.5  [Reserved]
1902.6  Establishing supervised bank accounts.
1902.7  Pledging collateral for deposit of funds in supervised bank 
          accounts.
1902.8  Authority to establish supervised bank accounts, deposit loan 
          checks and other funds, countersign checks, close accounts, 
          and execute all forms in connection with supervised bank 
          account transactions.
1902.9  Deposits.
1902.10  Withdrawals.
1902.11  District and county office records.
1902.12-1902.13  [Reserved]
1902.14  Reconciliation of accounts.
1902.15  Closing accounts.
1902.16  Request for withdrawals by State Director.
1902.17-1902.49  [Reserved]
1902.50  OMB control number.

Exhibit A to Subpart A [Reserved]
Exhibit B to Subpart A--United States Department of Agriculture, Farmers 
          Home Administration or Its Successor Agency Under Public Law 
          103-354--Interest-Bearing Deposit Agreement

Subpart B [Reserved]

   Subpart C--Selecting a Financial Institution for the Concentration 
                          Banking System (CBS)

1902.101-1902.103  [Reserved]
1902.104  Establishing or changing a TLA.
1902.105-1902.149  [Reserved]
1902.150  OMB control number.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; 7 CFR 2.16 
and 2.42.



         Subpart A--Disbursement of Loan, Grant, and Other Funds

    Source: 46 FR 36106, July 14, 1981, unless otherwise noted.



Sec. 1902.1  General.

    This subpart prescribes the policies and procedures of the Farmers 
Home Administration (FmHA) or its successor agency under Public Law 103-
354 for disbursement of funds under the Loan Disbursement System (LDS), 
in establishing and using supervised bank accounts, and in placing 
Multi-Family Housing (MFH) reserve accounts in supervised bank accounts. 
The LDS system provides for disbursement of funds on an as needed basis 
to substantially reduce interest costs to FmHA or its successor agency 
under Public Law 103-354 borrowers, U.S. Treasury, and FmHA or its 
successor agency under Public Law 103-354.
    (a) Forms FmHA or its successor agency under Public Law 103-354 
1940-1, ``Request for Obligation of Funds,'' and FmHA or its successor 
agency under Public Law 103-354 1944-51, ``Multiple Family Housing 
Obligation--Fund Analysis,'' provide for obligation only, obligation and 
check request for the full amount of the loan or grant except for MFH, 
and obligation and check request for a partial amount of the loan or 
grant. The instructions on when and how to use these forms are contained 
in the Forms Manual Insert (FMI) for the forms. Instructions for using 
Form FmHA or its successor agency under Public Law 103-354 1944-51 for 
obligation and check request via computer terminal may also be found in 
the ``Multiple Family Housing User Procedures.'' FmHA or its successor 
agency under Public Law 103-354 forms are

[[Page 58]]

available in any FmHA or its successor agency under Public Law 103-354 
office.
    (b) Forms FmHA or its successor agency under Public Law 103-354 440-
57, ``Acknowledgement of Obligated Funds/Check Request'' and FmHA or its 
successor agency under Public Law 103-354 1944-57, ``MFH Acknowledgement 
of Obligated Funds/Check Request,'' provide for:
    (1) The initial loan check;
    (2) All subsequent loan checks;
    (3) Making corrections on the data in the loan account as reflected 
on the form;
    (4) Notifying the Finance Office of the loan closing date and the 
loan amortization effective date;
    (5) Providing requested information from the Finance Office; and,
    (6) For Multiple Family Housing (MFH) loans providing Maximum Debt 
Limit and Appraised Value. The instructions on when and how to use these 
forms are contained in the FMI for the forms. However, for MFH loans and 
grants whenever possible, check obligation requests and loan closings 
should be done via the field office computer terminal. Instructions may 
be found in the ``Multiple Family Housing User Procedures.''
    (c) See FmHA or its successor agency under Public Law 103-354 
Instruction 2018-D (available in any FmHA or its successor agency under 
Public Law 103-354 office) for procedures to follow if checks are lost 
or destroyed.
    (d) Borrowers as referred to in this subpart include both loan and 
grant recipients. They are referred to as depositors in the deposit 
agreements hereinafter described. References herein and in deposit 
agreements to ``other lenders'' include lenders and grantors other than 
FmHA or its successor agency under Public Law 103-354.
    (e) Banks referred to in this subpart are those in which deposits 
are insured by the Federal Deposit Insurance Corporation (FDIC).
    (f) Savings and Loans referred to in this subpart are those in which 
deposits are insured by the Federal Savings and Loan Insurance 
Corporation (FSLIC).
    (g) Credit Unions referred to in this subpart are those in which 
deposits are insured by the National Credit Union Administration (NCUA).
    (h) Financial Institutions as referred to in this subpart include 
banks, savings and loans, and credit unions which are covered by the 
proper insurance coverage cited in paragraphs (e), (f) and (g) of this 
section.
    (i) Supervised bank accounts referred to in this subpart are bank, 
savings and loan, or credit union accounts established through deposit 
agreements entered into between the borrower, the United States of 
America acting through the FmHA or its successor agency under Public Law 
103-354, and the Financial Institution on Form FmHA or its successor 
agency under Public Law 103-354 402-1, ``Deposit Agreement''.
    (j) Form FmHA or its successor agency under Public Law 103-354 402-1 
provides for the deposit of funds in a supervised bank account to assume 
the performance of the borrower's obligation to FmHA or its successor 
agency under Public Law 103-354 in connection with a loan and grant.
    (k) ``Interest-Bearing Deposit Agreement'' (Exhibit B), provides for 
the deposit of loan or grant funds that are not required for immediate 
disbursement in specified interest-bearing deposits, and it is executed 
in conjunction with Form FmHA or its successor agency under Public Law 
103-354 402-1.

[46 FR 36106, July 14, 1981, as amended at 50 FR 8584, Mar. 4, 1985; 53 
FR 35670, Sept. 14, 1988; 54 FR 47959, Nov. 20, 1989; 59 FR 3778, Jan. 
27, 1994; 59 FR 54788, Nov. 2, 1994]



Sec. 1902.2  Policies concerning disbursement of funds.

    (a) The Automated Data Processing System (ADPS) will be utilized 
whenever possible in accordance with the specific program procedures, 
except where prohibited by State statutes. The capability to request 
Treasury checks on an as needed basis reduces the need for supervised 
bank accounts. Therefore, supervised bank accounts will be used only in 
certain instances. e.g.:
    (1) When a construction loan is made and the construction is 
substantially completed, but a small amount is being withheld pending 
completion of landscaping or some similar item, or a small loan closing. 
In this case, the

[[Page 59]]

amount of funds not disbursed when the predetermined amortization 
effective date occurs may be placed in a supervised bank account for 
future disbursement as appropriate.
    (2) When a large number of checks will be issued in the construction 
of a dwelling or other development, as for example under the ``borrower 
method'' of construction or in Operating (OL) loans and Emergency (EM) 
loans. In such cases, installment checks will be requested from the 
Finance Office as necessary and deposited in a supervised bank account 
and disbursed to suppliers, sub-contractors, etc., as necessary. Those 
District and County Offices authorized to request checks by the ADPS may 
request more than one check at a time. If more than one check is 
required, a Form FmHA or its successor agency under Public Law 103-354 
440-57 or Form FmHA or its successor agency under Public Law 103-354 
1944-57 will be prepared for each check.
    (3) Association loan and grant funds made on a multiple advance 
basis need not be deposited in a supervised bank account unless required 
by State statutes or otherwise determined necessary by the Loan Approval 
Official.
    (4) Supervised bank accounts will be used only when needed as 
defined in paragraph (a)(6) of this section to assure the correct 
expenditures of all or a part of loan and grant funds, borrower 
contributions, and borrower income. Such accounts will be limited in 
amount and duration to the extent feasible through the prudent 
disbursement of funds and the prompt termination of the interests of 
FmHA or its successor agency under Public Law 103-354 and other lenders 
when the accounts are no longer required.
    (5) Income from the sale of security or Economic Opportunity (EO) 
property or the proceeds from insurance on such property will be 
deposited in a supervised bank account under Form FmHA or its successor 
agency under Public Law 103-354 402-1 when the District Director or 
County Supervisor determines it is needed as defined in paragraph (a)(6) 
of this section to assure that the funds will be available for 
replacement of the property.
    (6) When it is determined by the County Supervisor and requested or 
agreed to by the borrower that special supervision is needed in the 
management of the borrower's financial affairs, funds may be deposited 
in a supervised bank account. This supervisory technique will be used 
for a temporary period to help the borrower learn to properly manage 
his/her financial affairs. Such a period will not exceed one year unless 
extended by the District Director.
    (7) In exceptional cases when the unincorporated EO cooperative or 
grazing association borrower cannot obtain a position fidelity bond, its 
income may be deposited as provided for in Sec. 1902.6 (and 
Sec. 1902.2(f) of this subpart if another lender is involved).
    (b) For all construction loans and those loans using multiple 
advances, only the actual amount to be disbursed at loan closing will be 
requested through the State Office terminal. Subsequent checks will be 
ordered as needed through the ADPS system.
    (c) Program instructions provide information as to the type of note 
to be utilized and the method of handling advances and the interest 
accrued thereon. For individual loan programs, interest will accrue from 
the loan closing date or date of check whichever is later. For 
association and organization type loans interest will accrue from the 
date the check is delivered to the borrower. For all RRH, RCH, LH or RHS 
loans, interest will accrue from the date of the check.
    (d) For all loan accounts, when the total amount has not been 
advanced at the amortization effective date, as defined in the FMI for 
Form FmHA or its successor agency under Public Law 103-354 1940-1, (and 
Form FmHA or its successor agency under Public Law 103-354 1944-51, for 
multiple family housing), the Finance Office will forward the remaining 
balance to the District Director or County Supervisor for appropriate 
action, unless the District Director or County Supervisor notifies the 
Finance Office of other arrangements.
    (e) When a check cannot be negotiated within 20 working days from 
the date of the check, the District Director or County Supervisor will 
process the check(s) with Form(s) FmHA or its successor agency under 
Public Law 103-

[[Page 60]]

354 1940-10, ``Cancellation of U.S. Treasury Check and/or Obligation,'' 
(or Form FmHA or its successor agency under Public Law 103-354 1944-53, 
``Multiple Family Housing Cancellation of U.S. Treasury Check and/or 
Obligation,'' for multiple family housing loans) in accordance with FmHA 
or its successor agency under Public Law 103-354 Instruction 2018-D 
(available in any FmHA or its successor agency under Public Law 103-354 
office).
    (f) The debt instruments executed at the time of loan closing 
constitute an obligation on the part of the Government to disburse all 
funds at one time or in multiple advances provided the funds are for 
purposes authorized by the Government at the time of loan closing. This 
obligatory commitment takes priority over any intervening liens or 
advances by other creditors regardless of the provisions of the State 
laws involved.

[46 FR 36106, July 14, 1981, as amended at 50 FR 8584, Mar. 4, 1985; 53 
FR 35670, Sept. 14, 1988; 54 FR 47959, Nov. 20, 1989; 55 FR 21524, May 
25, 1990; 59 FR 54788, Nov. 2, 1994]



Sec. 1902.3  Procedures to follow in fund disbursement.

    (a) The District Director or County Supervisor will determine during 
loan approval the amount(s) of loan check(s)--full or partial--and 
forward such request to be processed through the ADPS system.
    (b) When check(s) are delivered to the District or County Office, 
the District Director or County Supervisor will make sure that the name 
of the borrower and the amount(s) of check(s) coincide with the request 
on file. The District Director or County Supervisor should be sure that 
the check is properly endorsed to insure payment to the intended 
recipient. Examples of such restrictive endorsements are:
    (1) ``For Deposit only to Account No. (Number of Construction 
Account) of (Name of Borrower) in (Name of Financial Institution).''
    (2) ``Pay to the order of (3rd party payee)''--(Contractor, 
Developer, Sub-Contractor, Building Supply House, etc.) for the purpose 
of ----------.
    (c) When necessary and only under the circumstances listed in 
Sec. 1902.2 the District Director or County Supervisor will establish, 
or cause to be established, a supervised bank account. Funds deposited 
in a supervised bank account are to be recorded and accounted for on 
Form FmHA or its successor agency under Public Law 103-354 402.2, 
``Statement of Deposits and Withdrawals.''

[46 FR 36106, July 14, 1981, as amended at 53 FR 26588, July 14, 1988; 
53 FR 35670, Sept. 14, 1988; 54 FR 39727, Sept. 28, 1989]



Sec. 1902.4  Establishing MFH reserve accounts in a supervised bank account.

    (a) General requirements. All MFH borrowers required to maintain 
reserve accounts must place the reserve accounts in a supervised bank 
account(s) which meets the following requirements:
    (1) Countersignature requirements. The reserve account must require 
that any funds withdrawn be countersigned by an authorized FmHA or its 
successor agency under Public Law 103-354 official.
    (2) Restrictions on collateral. The financial institution holding 
the reserve account must ensure that the funds are not pledged or taken 
as security without the Agency's prior consent.
    (3) Interest bearing. The reserve account funds are encouraged to be 
maintained in an interest-bearing account. The ``Interest-Bearing 
Deposit Agreement'' set out in exhibit B of this subpart is not required 
to be used for reserve accounts.
    (4) Restricted investments. Reserve funds must be placed in 
investments authorized in subpart C of part 1930 of this chapter. The 
authorized investments are deemed to be of acceptable risk such that the 
potential for any loss is minimal.
    (5) Financial institutions. The reserve account must be maintained 
in authorized financial institutions set out in subpart C of part 1930 
of this chapter (e.g., banks, savings and loan institutions, credit 
unions, brokerage firms, mutual funds, etc.). Generally, any financial 
institution may be used provided invested or deposited funds are insured 
to protect against theft and dishonesty. The reserve account funds need 
not be Federally insured. However, if Federally insured, any amount

[[Page 61]]

held above the Federal insurance ceilings established must be backed by 
a pledge of collateral from the financial institution, or otherwise 
covered by non-federal insurance against theft and dishonesty.
    (6) Rules where multiple projects are involved. A reserve account(s) 
must be maintained for each borrower. When a borrower owns multiple 
projects, reserve accounts may be established for each project. A single 
reserve account may also be established by a borrower owning multiple 
projects, provided the conditions set out in subpart C of part 1930 of 
this chapter are met.
    (7) Term. Reserve accounts are expected to be kept for the full term 
of the loan.
    (b) Deposits and account activity statements--(1) Deposits. 
Generally, the FmHA or its successor agency under Public Law 103-354 
will not require the review or approval of deposits or the use of Forms 
FmHA or its successor agency under Public Law 103-354 402-1 or FmHA or 
its successor agency under Public Law 103-354 402-2.
    (2) Account activity statements. Generally, the FmHA or its 
successor agency under Public Law 103-354 will not monitor or reconcile 
the reserve account activity statements issued periodically by the 
financial institutions holding the funds. FmHA or its successor agency 
under Public Law 103-354 will monitor reserve account levels through 
budget reports, audits, and Agency reserve tracking systems. If disputes 
arise or the borrower is in violation of Agency regulations, the Agency 
may require account activity statements. When account activity 
statements are sought, it will normally be sufficient to obtain the 
statement which reflects balances as of the last activity statement 
ending period. Form FmHA or its successor agency under Public Law 103-
354 402-2 is not required to be used.

[59 FR 3778, Jan. 27, 1994]



Sec. 1902.5  [Reserved]



Sec. 1902.6  Establishing supervised bank accounts.

    (a) Each borrower will be given an opportunity to choose the 
financial institution in which the supervised bank account will be 
established, provided the bank is a member of the FDIC, the savings and 
loan is a member of the FSLIC, and the credit union is a member of the 
NCUA.
    (b) When accounts are established, it should be determined that:
    (1) The financial institution is fully informed concerning the 
provisions of the applicable deposit agreement,
    (2) Agreements are reached with respect to the services to be 
provided by the financial institution including the frequency and method 
of transmittal of checking account statements, and
    (3) Agreement is reached with the financial institution regarding 
the place where the counter-signature will be on checks.
    (c) When possible, District Directors or County Supervisors will 
make arrangements with financial institutions to waive service charges 
in connection with supervised bank accounts. However, there is no 
objection to the payment by the borrower of a reasonable charge for such 
service.
    (d) For each borrower, if the amounts of any loan and grant funds, 
plus any borrower contributions and funds from other sources to be 
deposited in the supervised bank account will exceed $100,000, the 
financial institution will be required to pledge collateral for the 
excess over $100,000, before the deposit is made (see Sec. 1902.7).
    (e) Only one supervised bank account will be established for any 
borrower regardless of the amount or source of funds, except for RRH 
loans where separate accounts will be established for each project.
    (f) When a supervised bank account is established, an original and 
two copies of the applicable Deposit Agreement and the Interest-Bearing 
Deposit Agreement (Exhibit B), when applicable, will be executed by the 
borrower, the financial institution, and a District or County Office 
employee. The original will be retained in the borrower's case file, one 
executed copy will be delivered to the financial institution and one 
executed copy to the borrower. An extra copy of the Interest-Bearing 
Deposit Agreement, when applicable, will

[[Page 62]]

be prepared and attached to the certificate, passbook, or other evidence 
of deposit representing the interest-bearing deposit.
    (1) If an agreement on the applicable Deposit Agreement has 
previously been executed and Form FmHA or its successor agency under 
Public Law 103-354 402-6, ``Termination of Interest in Supervised Bank 
Account,'' has not been executed with respect to it, a new agreement is 
not required when additional funds are to be deposited unless requested 
by the financial institution.
    (2) When the note and security instrument are signed by two joint 
borrowers or by both husband and wife, a joint survivorship supervised 
bank account will be established from which either can withdraw funds if 
State laws permit such accounts. In such cases both parties will sign 
the Deposit Agreement(s).

[46 FR 36106, July 14, 1981, as amended at 53 FR 231, Jan. 6, 1988]



Sec. 1902.7  Pledging collateral for deposit of funds in supervised bank accounts.

    (a) Funds in excess of $100,000, per financial institution, 
deposited for borrowers in supervised bank accounts, must be secured by 
pledging acceptable collateral with the Federal Reserve Bank (FRB) in an 
amount not less than the excess.
    (b) As soon as it is determined that the loan will be approved and 
the applicant has selected or tentatively selected a financial 
institution for the supervised bank account, the District Director or 
County Supervisor will contact the financial institution to determine:
    (1) That the financial institution selected is insured by the FDIC 
(banks), FSLIC (savings and loans), or NCUA (credit unions).
    (2) Whether the financial institution is willing to pledge 
collateral with the FRB under 31 CFR part 202 (Treasury Circular 176) to 
the extent necessary to secure the amount of funds being deposited in 
excess of $100,000.
    (3) If the financial institution is not a member of the Federal 
Reserve System, it will be necessary for the financial institution to 
pledge the securities with a correspondent bank who is a member of the 
System. The correspondent bank should contact the FRB informing them 
they are holding securities pledged for the supervised bank account 
under 31 CFR part 202 (Treasury Circular 176).
    (c) If the financial institution is agreeable to pledging 
collateral, the District Director or County Supervisor should complete 
FmHA or its successor agency under Public Law 103-354 Form Letter 1901-
A-2 ``Designated Financial Institution--Collateral Pledge'' in an 
original and two copies, the original for the National Office, the first 
copy for the State Office, and the second copy for the District or 
County Office. The FmHA or its successor agency under Public Law 103-354 
Form Letter 1902-A-2 should be forwarded to the National Office at least 
30 days before the date of loan closing.
    (d) The National Office will arrange for the financial institution 
under its designation as a depositary and financial agent of the U.S. 
Government to pledge the requested collateral.
    (e) If, two days before loan closing, the local FmHA or its 
successor agency under Public Law 103-354 office which requested the 
collateral has not received notification from National Office that 
collateral has been pledged, contact should be made with the financial 
institution to ascertain whether they have pledged collateral with their 
local FRB under 31 CFR part 202 (Treasury Circular 176). If the 
financial institution has pledged collateral, the local FmHA or its 
successor agency under Public Law 103-354 office should contact the 
National Office, Budget Division, Revolving Fund Analysis Branch who 
will follow-up with the local FRB concerning the collateral.
    (f) When the amount of deposit in the supervised bank account has 
been reduced to a point where the financial institution desires part or 
all of the collateral released, it should contact the National Office at 
the address noted above. The local FmHA or its successor agency under 
Public Law 103-354 office will be contacted for release authorization. 
The authorization release will be made through the local FRB, with 
notification to the financial institution. The local FmHA or its 
successor agency under Public Law 103-354 office may

[[Page 63]]

also request release through the National Office.

[46 FR 36106, July 14, 1981, as amended at 53 FR 231, Jan. 6, 1988; 53 
FR 24437, June 29, 1988; 56 FR 50648, Oct. 8, 1991]



Sec. 1902.8  Authority to establish supervised bank accounts, deposit loan checks and other funds, countersign checks, close accounts, and execute all forms in 
          connection with supervised bank account transactions.

    District Directors or County Supervisors are authorized to establish 
supervised bank accounts, deposit loan checks and other funds, 
countersign checks, close accounts, and execute all forms in connection 
with supervised bank account transactions and redelegate this authority 
to a person listed in exhibit B of FmHA or its successor agency under 
Public Law 103-354 Instruction 1951-B, under their supervision who are 
considered capable of exercising such authority. State Directors will 
make written demand upon the bank for withdrawals as outlined in 
Sec. 1902.16.



Sec. 1902.9  Deposits.

    (a) Deposit by FmHA or its successor agency under Public Law 103-354 
personnel. (1) Checks made payable solely to the Federal Government, or 
any agency thereof, and a joint check when the Treasurer of the United 
States is a joint payee, may not be deposited in a supervised bank 
account.
    (2) FmHA or its successor agency under Public Law 103-354 personnel 
will accept funds for deposit in a borrower's supervised bank account 
only in the form of a check or money order endorsed by the borrower 
``For Deposit Only,'' or a check drawn to the order of the financial 
institution in which the funds are to be deposited, or a loan check 
drawn on the U.S. Treasury.
    (i) A joint check that is payable to the borrower and FmHA or its 
successor agency under Public Law 103-354 will be endorsed by the 
District Director or County Supervisor as provided in Sec. 1951.57(e) of 
this chapter.
    (ii) Ordinarily, when deposits are made from funds which are 
received as the result of consent or subordination agreements or 
assignments of income, the check should be drawn to the order of the 
financial institution in which the supervised bank account is 
established or jointly to the order of the borrower and the FmHA or its 
successor agency under Public Law 103-354. All such checks should be 
delivered or mailed to the District or County Office.
    (3) If direct or insured loan funds (other than OL or EM, loan 
funds) or borrower contributions are to be deposited in a supervised 
bank account, such funds will be deposited on the date of loan closing 
after it has been determined that the loan can be closed. However, if it 
is impossible to deposit the funds on the day the loan is closed due to 
reasons such as distance from the financial institution or banking 
hours, the funds will be deposited on the first banking day following 
the date of loan closing.
    (4) Grant funds will be deposited when such funds are delivered.
    (5) When funds from any source are deposited by FmHA or its 
successor agency under Public Law 103-354 personnel in a supervised bank 
account, a deposit slip will be prepared in an original and two copies 
and distribution as follows: Original to the financial institution, one 
copy to the borrower, and one copy for the borrower's case folder. The 
names of the borrower, the sources of funds, and ``Subject to FmHA or 
its successor agency under Public Law 103-354 Countersignature,'' and if 
applicable, the account number will be entered on each deposit slip.
    (6) A loan or grant check drawn on the U.S. Treasury may be 
deposited in a supervised bank account without endorsement by the 
borrower when it will facilitate delivery of the check and is acceptable 
to the financial institution. The borrower will be notified immediately 
of any deposit made and will be furnished a copy of the deposit slip. 
When a deposit of this nature is made, the following endorsement will be 
used:

    For deposit only in the supervised bank account of (name of 
borrower) in the (name of financial institution and address when 
necessary for identification) pursuant to Deposit Agreement dated ------
--.


[[Page 64]]


    (7) Accounts established through the use of Interest-Bearing Deposit 
Agreement will be in the name of the depositor and the Government.
    (b) Deposits by borrowers. Funds in any form may be deposited in the 
supervised bank account by the borrower if authorized by FmHA or its 
successor agency under Public Law 103-354 provided the financial 
institution has agreed that when a deposit in made to the account by 
other than FmHA or its successor agency under Public Law 103-354 
personnel, the financial institution will promptly deliver or mail a 
copy of the deposit slip to the FmHA or its successor agency under 
Public Law 103-354 District or County Office.
    (1) A loan or grant check drawn on the U.S. Treasury may be 
deposited in a supervised bank account by a borrower, provided the 
following endorsement is used and is inserted thereon prior to delivery 
to the borrower for signature:

    For deposit only in my supervised bank account in the (name of 
financial institution and address when necessary for identification) 
pursuant to Deposit Agreement dated --------.

    (2) Funds other than loan or grant funds may be deposited by the 
borrower in those exceptional instances where an agreement is reached 
between the District Director or County Supervisor and the borrower, 
whereby the borrower will make deposits of income from any source 
directly into the supervised bank account. In such instances the 
borrower will be instructed to prepare the deposit slip in the manner 
described in Sec. 1902.9(a)(5).



Sec. 1902.10  Withdrawals.

    (a) The District Director or County Supervisor will not countersign 
checks on the supervised bank account for the use of funds unless the 
funds deposited by the borrower from other sources were cash deposits, 
or checks which the District Director or County Supervisor knows to be 
good, or until the deposit checks have cleared.
    (b) Withdrawals of funds deposited under the applicable deposit 
agreement are permitted only by order of the borrower and 
countersignature of authorized FmHA or its successor agency under Public 
Law 103-354 personnel, or upon written demand on the financial 
institution by the State Director.
    (c) Upon withdrawal or maturity of interest-bearing accounts 
established through the use of an Interest-Bearing Deposit Agreement, 
such funds will be credited to the supervised bank account established 
through the use of Form FmHA or its successor agency under Public Law 
103-354 402-1.
    (d) The issuance of checks on the supervised bank account will be 
kept to the minimum possible without defeating the purpose of such 
accounts. When major items of capital goods are being purchased, or a 
limited number of relatively costly items of operating expenses are 
being paid, or when debts are being refinanced, the checks will be drawn 
to the vendors or creditors. If minor capital items are being purchased 
or numerous items of operating and family living expenses are involved 
as in connection with a monthly budget, a check may be drawn to the 
borrower to provide the funds to meet such costs.
    (1) A check will be issued payable to the appropriate payee but will 
never be issued to ``cash.'' The purpose of the expenditure will be 
clearly shown on Form FmHA or its successor agency under Public Law 103-
354 402-2 and indicated on the fact of the check. When checks are drawn 
in favor of the borrower to cover items too numerous to identify, the 
expenditure will be identified on the check, as ``miscellaneous.''
    (2) Normally, OL and EM loan funds will not be withdrawn from the 
supervised bank account until the lien search has been made and a 
determination reached that the required security has been obtained. This 
applies also to withdrawal of funds in secured individual loan cases. 
However, in those instances when the applicant is unable to pay for the 
lien search and filing fees from personal funds, a check for this 
purpose may be drawn on the supervised bank account to meet these loan 
making requirements.
    (3) Ordinarily, a check will be countersigned before it is delivered 
to the payee. However, in justifiable circumstances such as when 
excessive travel on the part of the borrower, District Director of 
County Supervisor would be involved, or purchase would

[[Page 65]]

be prevented, and the borrower can be relied upon to select goods and 
services in accordance with the plans, a check may be delivered to the 
payee by the borrower before being countersigned.
    (i) When a check is to be delivered to the payee before being 
countersigned, the District Director or County Supervisor must make it 
clear to the borrower and to the payee, if possible, that the check will 
be countersigned only if the quantity and quality of items purchased are 
in accordance with approved plans.
    (ii) Checks delivered to the payee before countersignature will bear 
the following legend in addition to the legend for countersignature: 
``Valid only upon countersignature of Farmers Home Administration or its 
successor agency under Public Law 103-354.''
    (iii) The check must be presented by the payee or a representative 
to the District or County Office of the FmHA or its successor agency 
under Public Law 103-354 servicing the account for the required 
countersignature.
    (iv) Such check must be accompanied by a bill of sale, invoice, or 
receipt signed by the borrower identifying the nature and cost of goods 
or services purchased or similar information must be indicated on the 
check.
    (4) For real estate loans or grants, whether the check is delivered 
to the payee before or after countersignature, the number, and date of 
the check will be inserted on all bills of sale, invoices, receipts, and 
itemized statements for materials, equipment, and services.
    (5) Bills of sale, and so forth, may be returned to the borrower 
with the canceled check for the payment of the bill.
    (6) Checks to be drawn on a supervised bank account will bear the 
legend:

Countersigned, not as co-maker or endorser.
________________________________________________________________________

                                 (Title)

________________________________________________________________________

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

[46 FR 36106, July 14, 1981, as amended at 54 FR 47959, Nov. 20, 1989]



Sec. 1902.11  District and county office records.

    A record of funds deposited in a supervised bank account will be 
maintained on Form FmHA or its successor agency under Public Law 103-354 
402-2 in accordance with the FMI. The record of funds provided for 
operating purposes by another creditor or grantor will be on a separate 
Form FmHA or its successor agency under Public Law 103-354 402-2 so that 
they can be clearly identified.

[46 FR 36106, July 14, 1981, as amended at 51 FR 12308, Apr. 10, 1986]



Secs. 1902.12-1902.13  [Reserved]



Sec. 1902.14  Reconciliation of accounts.

    (a) A checking account statement will be obtained periodically in 
accordance with established practices in the area. If the checking 
account statement does not include sufficient information to reconcile 
the account (the name of the payee or the check number and the amount of 
each check, i.e., a negotiable demand draft drawn on a financial 
institution), the original cancelled check or either a microfilm copy or 
other reasonable facsimile of the cancelled check must be provided to 
the District or County Office with the statement. Checking account 
statements will be reconciled promptly with District or County Office 
records. The person making the reconciliation will initial the record 
and indicate the date of the action.
    (b) All checking account statements and, if necessary, original 
cancelled checks or either a microfilm copy or other reasonable 
fascimile of the cancelled checks will be forwarded immediately to the 
borrower when bank statements and District or County Office records are 
in agreement. If a transmittal is used, Form FmHA or its successor 
agency under Public Law 103-354 140-4, ``Transmittal of Documents,'' is 
prescribed for that purpose.
    (c) If the Financial Institution did not return the original 
cancelled check(s) to the Agency with the statements, and FmHA or its 
successor agency under Public Law 103-354 has a need for the original 
cancelled check(s) the Financial Institution, upon request by the 
Agency, will furnish to the

[[Page 66]]

Agency the requested original cancelled check(s) or a certified 
microfilmed copy or other reasonable certified facsimile of the 
cancelled check(s) and will provide this service to the Farmers Home 
Administration or its successor agency under Public Law 103-354 with no 
fees being assessed the Agency or the Depositor's account for the 
service.

[53 FR 35671, Sept. 14, 1988, as amended at 55 FR 21524, May 25, 1990]



Sec. 1902.15  Closing accounts.

    When FmHA or its successor agency under Public Law 103-354 loan or 
grant funds and those of any other lender or grantor have all been 
properly expended or withdrawn, Form FmHA or its successor agency under 
Public Law 103-354 402-6 may be used to give FmHA or its successor 
agency under Public Law 103-354's consent (and of another lender or 
grantor, if involved) to close the supervised bank account in the 
following situations:
    (a) When FmHA or its successor agency under Public Law 103-354 loan 
funds in the supervised bank account of a borrower have been reduced to 
$100 or less, and a check for the unexpended balance has been issued to 
the borrower to be used for authorized purposes.
    (b) For all loans accounts, except loans listed in Sec. 1902.15(c) 
of this section, after completion of authorized loan funds expenditures, 
and after promptly refunding any remaining unexpended loan funds on the 
borrower's loan account with FmHA or its successor agency under Public 
Law 103-354 or another lender, as appropriate.
    (c) For Community Facility, Water and Waste Disposal, Watershed 
(WS), Organizational Rural Rental Housing (RRH), Resource Conservation 
and Development (RCD), EO loans to a Cooperative Association, Rural 
Cooperative Housing (RCH), or Organizational Labor Housing (LH) loan and 
grant accounts, when the funds have been expended in accordance with the 
requirements of part 1942 subpart A, the supervised bank account will be 
closed within 90 days following completion of development, unless an 
extension of time is authorized in writing by the District Director. If 
the borrower will not agree to close the account, the District Director 
or County Supervisor will request the State Director to make demand upon 
the financial institution in accordance with Sec. 1902.16.
    (d) Promptly upon death of a borrower, except when the loan is being 
continued with a joint debtor, when a borrower is in default and it is 
determined that no further assistance will be given, or when a borrower 
is no longer classified as ``active.''
    (1) Deceased borrowers. (i) Ordinarily, upon notice of the death of 
a borrower, the District Director or the County Supervisor will request 
the State Director to make demand upon the bank for the balance on 
deposit and apply all the balance after payment of any bank charges to 
the borrower's FmHA or its successor agency under Public Law 103-354 
indebtedness. When the State Director approves continuation with a 
survivor, the supervised bank account of deceased borrower may be 
continued with a remaining joint debtor who is liable for the loan and 
agrees to use the unexpended funds as planned, provided:
    (A) The account is a joint survivorship supervised bank account, or
    (B) If not a joint survivorship account, the financial institution 
will agree to permit the addition of the surviving joint debtor's name 
to the existing signature card and the appropriate Deposit Agreement and 
continue to disburse checks out of the existing account upon FmHA or its 
successor agency under Public Law 103-354's countersignature and the 
joint debtor's signature in place of the deceased borrower, or
    (C) The financial institution will permit the State Director to 
withdraw the balance from the existing supervised bank account with a 
check jointly payable to the FmHA or its successor agency under Public 
Law 103-354 and the surviving joint debtor and deposit the money in a 
new supervised bank account with a surviving joint debtor, and will 
disburse checks from this new account upon the signature of such 
survivor and the countersignature of an authorized FmHA or its successor 
agency under Public Law 103-354 official.

[[Page 67]]

    (ii) The State Director, before applying the balance remaining in 
the supervised bank account to the FmHA or its successor agency under 
Public Law 103-354 indebtedness, is authorized upon approval by the 
Office of the General Counsel (OGC) to refund any unobligated balances 
of funds from other lenders to the FmHA or its successor agency under 
Public Law 103-354 borrower for specific operating purposes in 
accordance with subordination agreements or other arrangements between 
the FmHA or its successor agency under Public Law 103-354, the lender 
and the borrower.
    (iii) The State Director, upon the recommendation of an authorized 
representative of the estate of the deceased borrower and the approval 
of the OGC, is authorized to approve the use of deposited funds for the 
payment of commitments for goods delivered or services performed in 
accordance with the deceased borrower's plans approved by FmHA or its 
successor agency under Public Law 103-354.
    (2) Borrowers in default. Whenever it is impossible or impractical 
to obtain a signed check from a borrower whose supervised bank account 
is to be closed, the District Director or County Supervisor will request 
the State Director to make demand upon the financial institution for the 
balance on deposit in the borrower's supervised bank account for 
application as appropriate:
    (i) To the borrower's FmHA or its successor agency under Public Law 
103-354 indebtedness, or
    (ii) As refunds of any unobligated advance provided by other lenders 
which were deposited in the account, or
    (iii) For the return of FmHA or its successor agency under Public 
Law 103-354 grant funds to the FmHA or its successor agency under Public 
Law 103-354 Finance Office, or
    (iv) For the return of grant funds to other grantors.
    (3) Inactive borrowers. An inactive borrower is one whose loan has 
not been paid in full, but is no longer classified as ``active.''
    (4) Paid up borrowers. A paid-up borrower is one who has a balance 
remaining in the supervised bank account and has repaid the entire 
indebtedness to FmHA or its successor agency under Public Law 103-354 
and has properly expended all funds advanced by other lenders. In such 
cases the District Director or County Supervisor will (i) notify the 
borrower in writing that the interests in the account of FmHA or its 
successor agency under Public Law 103-354 have been terminated, and (ii) 
inform the borrower of the balance remaining in the supervised bank 
account.

[46 FR 36106, July 14, 1981, as amended at 53 FR 231, Jan. 6, 1988; 54 
FR 47196, Nov. 13, 1989; 66 FR 1569, Jan. 9, 2001]



Sec. 1902.16  Request for withdrawals by State Director.

    When the State Director is requested to make written demand upon the 
financial institution for the balance on deposit in the supervised bank 
account, or any part thereof, the request will be accompanied by the 
following information.
    (a) Name of borrower as it appears on the applicable Deposit 
Agreement.
    (b) Name and location of financial institution.
    (c) Amount to be withdrawn for refund to another lender of any 
balance that may remain of funds received by the borrower from such 
lender as a loan or grant, or under a subordination agreement or other 
arrangement between the FmHA or its successor agency under Public Law 
103-354, the other lender, and the borrower.
    (d) Amount to be withdrawn, excluding any service charges, for a 
refund of FmHA or its successor agency under Public Law 103-354's.
    (e) Other pertinent information including reasons for the 
withdrawal.



Secs. 1902.17-1902.49  [Reserved]



Sec. 1902.50  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0158. Public reporting burden 
for this collection of information is estimated to vary from 5 minutes 
to 1\1/2\ hours per response, with an average of 0.42 hours per 
response, including time for reviewing instructions, searching existing 
data sources, gathering and

[[Page 68]]

maintaining the data needed, and completing and reviewing the collection 
of information. Send comments regarding this burden estimate or any 
other aspect of this collection, including suggestions for reducing this 
burden, to Department of Agriculture, Clearance Officer, OIRM, room 404-
W, Washington, DC 20250; and to the Office of Management and Budget, 
Paperwork Reduction Project (OMB 0575-0158), Washington, DC 
20503.

[59 FR 3778, Jan. 27, 1994]

                    Exhibit A to Subpart A [Reserved]

Exhibit B to Subpart A--United States Department of Agriculture, Farmers 
  Home Administration or Its Sucessor Agency Under Public Law 103-354--
                   Interest-Bearing Deposit Agreement

    BECAUSE certain funds of ---------- referred to as the 
``Depositor,'' are now on deposit with the ----------, referred to as 
the ``Financial Institution,'' under a Deposit Agreement, dated --------
--, 19----, providing for supervision by the United States of America, 
acting through the Farmers Home Administration or its successor agency 
under Public Law 103-354, referred to as the ``Government,'' which 
Deposit Agreement grants to the Government security and/or other 
interest in the funds covered by that Deposit Agreement, and
    BECAUSE certain of these funds are not now required for immediate 
disbursement and it is the desire of the Depositor to place these funds 
in interest-bearing deposits with the Financial Institution:
    THEREFORE, the Depositor and the Government authorize and direct the 
Financial Institution to place -------- Dollars ($-------- ) of the 
funds subject to that Deposit Agreement in interest-bearing deposits as 
follows:

    $ -------- for a period of ---------- months at ---------- % 
interest.
    $ -------- for a period of ---------- months at ---------- % 
interest.
    $ -------- for a period of ---------- months at ---------- % 
interest.

    These interest-bearing deposits and the income earned on them at all 
times shall be considered a part of the account covered by said Deposit 
Agreement except that the right of the Depositor and the Government to 
jointly withdraw all or a portion of the funds in the account covered by 
the Deposit Agreement by an order of the Depositor countersigned by a 
representative of the Government, and the right of the Government to 
make written demand for the balance or any portion of the balance, is 
modified by the above time deposit maturity schedule. The evidence of 
such time deposits shall be issued in the names of the Depositor and the 
Farmers Home Administration or its successor agency under Public Law 
103-354.
    A copy of this Agreement shall be attached to and become a part of 
each certificate, passbook, or other evidence of deposit that may be 
issued to represent such interest-bearing deposits.
    Executed this -------- day of --------, 19----.
UNITED STATES OF AMERICA
By:_____________________________________________________________________

County Supervisor
Farmers Home Administration or its successor agency under Public Law 
103-354
U.S. Department of Agriculture

________________________________________________________________________
(Depositor)

By:_____________________________________________________________________

Title:__________________________________________________________________
    Accepted on the above terms and conditions this -------- day of ----
----, 19----.

________________________________________________________________________

(Financial Institution)

________________________________________________________________________

(Office or Branch)

By:_____________________________________________________________________

Title:__________________________________________________________________

[53 FR 35671, Sept. 14, 1988; 55 FR 21524, May 25, 1990]

Subpart B [Reserved]



   Subpart C--Selecting a Financial Institution for the Concentration 
                          Banking System (CBS)



Secs. 1902.101-1902.103  [Reserved]



Sec. 1902.104  Establishing or changing a TLA.

    (a) Establishing a TLA. (1) After an FI has been selected by the 
FmHA or its successor agency under Public Law 103-354 field office, the 
FmHA or its successor agency under Public Law 103-354 office will 
provide the State Office with the name and address of the FI selected.
    (2) The FmHA or its successor agency under Public Law 103-354 field 
office must have the FI execute a MOU for CBS. Form FmHA or its 
successor agency under Public Law 103-354 1902-7, will be completed when 
the MOU is executed. The FmHA or its successor

[[Page 69]]

agency under Public Law 103-354 field office will complete item 1 and 
the FI will complete the rest of the summary. Instructions for 
completing this form are in the FMI. The FmHA or its successor agency 
under Public Law 103-354 field office will forward three signed copies 
of the MOU together with the original and two copies of Form FMHA 1902-7 
to the State Office coordinator. The State Office coordinator will check 
for the following common errors before submitting to the: Cash 
Management Branch, FmHA or its successor agency under Public Law 103-354 
Finance Office, Mail Code FC-354, 1520 Market Street, St. Louis, MO 
63103.
    (i) Check to see that the local bank has signed all copies of the 
MOU and has affixed its seal next to the signature.
    (ii) Check signature blocks to insure that the local FmHA or its 
successor agency under Public Law 103-354 office has not signed in any 
of the blocks provided for the local bank and Treasury. This agreement 
is between the local bank and Treasury and FmHA or its successor agency 
under Public Law 103-354 will not be a party to the agreement.
    (iii) Do not allow the bank to cross out or change any clauses in 
the MOU. Treasury will not accept modified agreements.
    (iv) Do not allow the bank to retype the agreement as this would 
require a word-for-word verification of the entire document to determine 
whether anything had been changed.
    (3) The Cash Management Branch will submit the MOU's to Treasury for 
signature along with the original and one copy of Form FmHA or its 
successor agency under Public Law 103-354 1902-7. Treasury will sign the 
copies of the MOU, send one copy to the FI, one to the local FmHA or its 
successor agency under Public Law 103-354 office, and keep one copy for 
the files. Treasury will notify the Cash Management Branch if a MOU is 
rejected.
    (4) The local FmHA or its successor agency under Public Law 103-354 
office must obtain selected information from the FI for funds transfer 
purposes on CBS including information necessary to establish a 
compensation account to receive ACH transfers from the concentrator 
bank.

[53 FR 26588, July 14, 1988, as amended at 59 FR 54788, Nov. 2, 1994]



Secs. 1902.105-1902.149  [Reserved]



Sec. 1902.150  OMB control number.

    The collection of information requirements in this regulation have 
been approved by the Office of Management and Budget and have been 
assigned OMB Control Number 0575-0128.

[53 FR 26588, July 14, 1988]

       PART 1904--LOAN AND GRANT PROGRAMS (INDIVIDUAL) [RESERVED]



PART 1910--GENERAL--Table of Contents




            Subpart A--Receiving and Processing Applications

Sec.
1910.1  General.
1910.2  Equal Credit Opportunity Act (ECOA) and Regulation B.
1910.3  Receiving applications.
1910.4  Processing applications.
1910.5  Evaluating applications.
1910.6-1910.9  [Reserved]
1910.10  Preference.
1910.11  Special requirements.
1910.12-1910.49  [Reserved]
1910.50  OMB control number.

Exhibit A to Subpart A [Reserved]
Exhibit B to Subpart A--Letter To Notify Socially Disadvantaged 
          Applicant(s)/Borrower(s) Regarding the Availability of Direct 
          Farm Ownership (FO) Loans and the Acquisition/Leasing of FmHA 
          or Its Successor Agency Under Public Law 103-354 Acquired 
          Farmland
Exhibit C to Subpart A--Letter To Notify Applicant(s)/Borrower(s) of 
          Their Responsibilities in Connection With FmHA or Its 
          Successor Agency Under Public Law 103-354 Farmer Program Loans 
          [Note]

                 Subpart B--Credit Reports (Individual)

1910.51  Purpose.
1910.52  [Reserved]
1910.53  Policy.
1910.54-1910.100  [Reserved]

                  Subpart C--Commercial Credit Reports

1910.101  Preface.
1910.102-1910.150  [Reserved]


[[Page 70]]


    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

    Source: 43 FR 56643, Dec. 4, 1978, unless otherwise noted.



            Subpart A--Receiving and Processing Applications

    Source: 53 FR 35671, Sept. 14, 1988, unless otherwise noted.



Sec. 1910.1  General.

    This subpart prescribes the policies and procedures for informing 
interested parties of the Farm Credit loan programs available through 
the Farm Service Agency (FSA), and how such requests are processed. 
Requests for Nonprogram (NP) assistance will be handled in accordance 
with subpart J of part 1951 of this chapter. References contained herein 
to the housing programs of the Rural Housing Service (RHS), or its 
successor agency, are no longer applicable.
    (a) The County Supervisor will provide information about FSA and RHS 
services to all persons making inquiry about FSA and RHS programs. This 
information may be provided by individual interviews, correspondence, or 
distribution of pamphlets, leaflets, and appropriate FSA and RHS 
regulations.
    (b) Wherever the term ``applicant'' appears in this subpart, it 
shall be construed to mean applicant and/or co-applicant, if any.
    (c) FmHA forms are available in any Rural Development (RD) or FSA 
office.
    (d) The terms ``interest credit'' and ''interest credit 
assistance,'' as they relate to Single Family Housing (SFH), are 
interchangeable with the term ``payment assistance.'' Payment assistance 
is the generic term for the subsidy provided to eligible SFH borrowers 
to reduce mortgage payments.
    (e) As used in this subpart in relation to Farm Credit Programs 
loans, Agency means the Farm Service Agency, its county and State 
committees and their personnel, and any successor agency.
    (f) As used in this subpart, the abbreviation ``Lo-Doc'' means Low-
Documentation and the abbreviation ``OL'' means Operating Loan.

[53 FR 35671, Sept. 14, 1988, as amended at 55 FR 21524, May 25, 1990; 
55 FR 29560, July 20, 1990; 56 FR 66959, Dec. 27, 1991; 58 FR 44263, 
Aug. 20, 1993; 58 FR 52646, Oct. 12, 1993; 60 FR 55122, Oct. 27, 1995; 
61 FR 35919, July 9, 1996; 61 FR 59777, Nov. 22, 1996; 62 FR 9353, Mar. 
3, 1997; 66 FR 1572, Jan. 9, 2001]



Sec. 1910.2  Equal Credit Opportunity Act (ECOA) and Regulation B.

    ECOA as amended, prohibits discrimination in credit based on sex, 
marital status, race, color, religion, natural origin, age (provided the 
applicant has the capacity to contract), because all or part of the 
applicant's income is derived from public assistance of any kind, or 
because the applicant has, in good faith, exercised any right under the 
Consumer Credit Protection Act. These shall hereafter be referred to in 
this subpart as ``ECOA prohibited bases.'' It is the policy of the 
Farmers Home Administration or its successor agency under Public Law 
103-354 that assistance and services shall not be denied to any person 
or applicant as a result of race, sex, national origin, color, religion, 
marital status, age, receipt of income from public assistance, or 
because the applicant has, in good faith, exercised any right under the 
Consumer Credit Protection Act.



Sec. 1910.3  Receiving applications.

    Applications for FSA or RHS assistance will ordinarily be filed in 
the County Office serving the area in which the farm, dwelling, 
business, or other facility for which financing is being requested is or 
will be located.
    (a) All persons applying for FSA or RHS assistance who are not 
indebted to FSA or RHS must file a written application. All persons 
wishing to submit an application will be encouraged to do so. No oral or 
written statement will be made to applicants or prospective applicants 
that would discourage them from applying for assistance, based on any 
ECOA ``prohibited bases.'' The filing of written applications will be 
encouraged even though funds may not be currently available, since 
complete applications must be considered in the date order received, 
except when

[[Page 71]]

program regulations or Veteran status provides for preference. 
Applications will normally be handled as follows:
    (1) Form FmHA 410-4, ``Application for Rural Housing Assistance 
(NonFarm Tract),'' will be used by applicants for RH loans on nonfarm 
tracts who depend primarily on off-farm income.
    (2) Form FmHA 410-1, ``Application for FmHA Services,'' will be used 
by all other applicants. These include persons applying for RH loans on 
farms or nonfarm tracts who derive a major portion of their income from 
farming. For EM loans, it is also necessary for the applicant to 
complete Form FmHA 1945-22, ``Certification of Disaster Losses.''
    (3) SF 424.2, ``Application for Federal Assistance (For 
Construction),'' with the requirements outlined in the applicable 
program exhibits will be used by all applicants applying for LH loans.
    (4) The Right to Financial Privacy Act of 1978, Title XI of Pub. L. 
95-630, requires that:
    (i) Except as specified in paragraph (a)(4)(ii) of this section, 
within 3 days of the receipt of an application for a loan or grant from 
an individual or a partnership of five or fewer members, the RD office 
will forward Form FmHA 410-7, ``Notification to Applicant on Use of 
Financial Information from Financial Institution,'' to those applicants.
    (ii) For a labor housing application filed by an individual or a 
partnership of five or fewer members, the RD office will comply with 
paragraph (a)(4)(i) of this section only if it is determined that 
financial information will be requested from any financial institution.
    (5) All individual loan applicants will sign Form FmHA or its 
successor agency under Public Law 103-354 410-9, ``Statement Required by 
the Privacy Act.'' A signed copy will remain with the application. No 
application is complete without a signed Form FmHA or its successor 
agency under Public Law 103-354 410-9 on file.
    (6) Information regarding race, national origin, sex, and marital 
status is needed for monitoring purposes for all applications filed for 
assistance to finance residential real estate and direct FO loans when 
the loan is to be secured by a lien on the property. In those cases, 
FmHA or its successor agency under Public Law 103-354 will request the 
applicant and/or co-applicant to furnish that information on the 
application on a voluntary basis. The application form will indicate 
that this information is provided on a voluntary basis.
    (7) Applicants are asked to identify any known relationship or 
association with an FmHA or its successor agency under Public Law 103-
354 employee when completing the application. When there is a 
relationship or association, the processing official must complete the 
action required under subpart D of part 1900 of this chapter.
    (b) Requests by FmHA or its successor agency under Public Law 103-
354 borrowers for additional assistance will be submitted as prescribed 
by each loan/grant program, and the following:
    (1) All applicants must provide their taxpayer's identification 
number with their applications, except as noted in paragraph (i) of this 
section.
    (2) RH applicants who have a current Form FmHA or its successor 
agency under Public Law 103-354 1944--3, ``Budget and/or Financial 
Statement'', or Form FmHA or its successor agency under Public Law 103-
354 410-4, and who are presently indebted to FmHA or its successor 
agency under Public Law 103-354, will be required to complete only the 
following items of Form FmHA or its successor agency under Public Law 
103-354 410-4 (if other information about their current status is not 
available for adequate processing of their applications, these 
applicants should fully complete Form FmHA or its successor agency under 
Public Law 103-354 410-4):
    (i) Name.
    (ii) Social Security Number.
    (iii) Loan purpose.
    (iv) Planned income for next 12 months.
    (v) Date and signature of the application.
    (3) Farmer Program applicants who are presently indebted to FmHA or 
its successor agency under Public Law 103- 354 will be required to 
complete Form FmHA or its successor agency under Public Law 103-354 410-
1. When application is made within 60 days of the date of table A, 
``Balance sheet,'' on Form

[[Page 72]]

FmHA or its successor agency under Public Law 103-354 431-2, ``Farm and 
Home Plan,'' and there are no significant changes that would affect 
eligibility, reference to table A of Form FmHA or its successor agency 
under Public Law 103-354 431-2 can be made in Item 17, ``Financial 
Statement as of Date of Application,'' of Form FmHA or its successor 
agency under Public Law 103-354 410-1.
    (4) Applicants for EM loans with new losses from disaster, as 
authorized under EM regulations, must also complete Form FmHA or its 
successor agency under Public Law 103-354 1945-22 in addition to the 
other required forms.
    (c) County Office employees will be responsible for receiving loan 
applications and giving a preliminary explanation of services available 
through FmHA or its successor agency under Public Law 103-354. An 
explanation of the types of assistance available should be given 
whenever it is not clear to the applicant what type of loan or grant 
will meet the applicant's needs. The employee receiving the application 
will make sure that it is properly completed, dated and signed, and will 
give whatever assistance is necessary. An applicant may apply for and 
maintain a loan account using a birth-given first name and a birth-given 
surname, or the spouse's surname, or a combination of surnames. Married 
persons may apply as individuals. In the case of a joint application for 
other than a farmer program loan, the persons requesting the assistance 
will designate who is listed as ``applicant'' and who is listed as ``co-
applicant.'' For farmer program loans, there will be only one applicant. 
If a husband and wife insist on applying as co-applicants for a farmer 
program loan and the farming operation is a sole proprietorship, they 
will be considered a joint operation and they both will have to meet the 
eligibility requirements applicable to the joint operation. County 
Office employees must explain to husbands and wives that they both do 
not need to apply for farmer program loans unless they desire to do so 
or the application is for an entity operation. If they apply together 
for a loan, it must be explained that they will be considered as a joint 
operation. When the use of veteran's preference is involved, the 
identity of the veteran must be properly documented if the name used in 
the application differs from that shown on the veteran's evidence of 
eligibility.
    (d) Information will be obtained about household members or others, 
including cosigners, as required by program regulations needed to 
determine eligibility for the requested assistance. A cosigner will be 
required only when it has been determined that the applicant cannot 
possibly meet the repayment or the security requirements for the loan 
request. When a co-signer will be required, the applicant will be 
requested to identify their choice of co-signer. An applicant will also 
be required to provide information concerning a co-signer, spouse or 
former spouse, who will not be a co-signer, or who is not a member of 
the household, when the applicant is relying on the co-signer, alimony, 
child support, separate maintenance from that spouse or former spouse as 
a basis for repayment, or receipt of such payments will be considered 
for eligibility. In such cases, information regarding the co-signer's, 
spouse's or former spouse's financial resources may be requested. Only 
information regarding the receipt and dependability of income from 
alimony, child support, or separate maintenance, provided by a former 
spouse, may be requested, considered, and verified to determine 
eligibility and repayment ability.
    (e) Signature requirements on the Promissory Note will be as needed 
to assure repayment of the indebtedness and as set out in the loan 
making regulations. The spouse of an applicant will not be required to 
sign the note unless the spouse's signature on the note is required to 
create a security interest or the spouse is a co-applicant. Signature 
requirements on the Mortgage or Deed of Trust will be sufficient to 
obtain the required lien, and to make the property being offered as 
security available to satisfy the debt in the event of default. FmHA or 
its successor agency under Public Law 103-354 State supplements will be 
issued to outline the requirements in accordance with State real 
property law. The State Director will obtain the advice of OGC

[[Page 73]]

prior to issuance of the State supplement.
    (f) If a spouse's signature would be necessary for FmHA or its 
successor agency under Public Law 103-354 to obtain the necessary 
security, information regarding an applicant's marital status will be 
obtained. Only the terms ``married'' and ``separated'' may be used to 
designate marital status. ``Unmarried'' includes single, divorced, or 
widowed persons.
    (g) FmHA or its successor agency under Public Law 103-354 may not 
request information concerning birth control practices, intentions 
concerning the bearing or rearing of children, or capability to bear 
children. Assumptions or aggregate statistics relating to the likelihood 
or probability that any particular group of persons will bear or rear 
children will not be used to evaluate creditworthiness, or for any other 
purpose; nor will the assumption be made that, for that reason, an 
applicant will receive diminished or interrupted income in the future.
    (h) If after discussing credit needs, it appears that the applicant 
may be able to obtain the necessary credit from some other source, the 
County Supervisor should provide information on the availability of such 
credit and provide the needed assistance in contacting that credit 
source. All applications, including those from applicants assisted in 
obtaining credit from other credit sources, will be listed and reported 
in accordance with FmHA or its successor agency under Public Law 103-354 
Instructions 1905-A and 2006-J which are available in all FmHA or its 
successor agency under Public Law 103-354 offices.
    (i) For all loans and grants, the applicant must furnish the 
applicant's taxpayer's identification number with the application, 
except as otherwise indicated in this paragraph. The taxpayer's 
identification number for individuals who are not business applicants is 
the Social Security Number (SSN). The taxpayer's identification number 
will be used as part of the borrower's case number, except as noted in 
paragraph (i)(3) of this section.
    (1) The SSN preceded by the State and county code numbers will 
constitute the borrower's case number to be used on all FmHA or its 
successor agency under Public Law 103-354 forms.
    (2) In the case of noncitizens who are permanent residents or on 
indefinite parole and who do not yet have a taxpayer's identification 
number, their applications will be filed; however, they will not be 
processed until the SSN is obtained. Disposition of applications not 
processed because of lack of the number will be as set forth in FmHA or 
its successor agency under Public Law 103-354 Instruction 2033-A, 
``Management of County Office Records,'' (available in any FmHA or its 
successor agency under Public Law 103-354 office).
    (3) The borrower's case number for residents of the Pacific Islands 
will be taxpayer's identification number issued by the Pacific Islands 
Government.
    (j) For all loans and credit sales secured by a first mortgage and 
involving the purchase of an existing 1 to 4 family unit, or purchase of 
a building site and construction of 1 to 4 family residential units, or 
FO loans involving tracts of 25 acres or less, whether made to an 
individual, corporation, partnership, joint operation, cooperative, 
association, or other entity, the booklet entitled ``Settlement Costs'' 
will be hand-delivered to the applicant when the completed application 
is received, or mailed to the applicant within three (3) business days 
after receipt of the application in the County Office.
    (1) Form FmHA or its successor agency under Public Law 103-354 440-
58, ``Estimate of Settlement Costs,'' will be completed by the County 
Supervisor and delivered to the applicant with the booklet.
    (2) A record of the date and method of delivery of the booklet and 
Form FmHA or its successor agency under Public Law 103-354 440-58 will 
be kept in the running record section of the applicant's/borrower's 
County Office case folder.
    (k) For loans, assumptions and credit sales to individuals for 
household purposes that are subject to the Real Estate Settlement 
Procedures Act (RESPA), Form FmHA or its successor agency under Public 
Law 103-354 1940-

[[Page 74]]

41, ``Truth in Lending Disclosure Statement,'' will be completed using 
``good-faith'' estimates, and will be delivered or placed in the mail to 
the applicant within 3 business days of receipt of the written 
application in the County Office.
    (l) Fees for the total amount charged for individual credit reports 
as indicated in exhibit A of subpart B of part 1910 of this chapter 
(available in any FmHA or its successor agency under Public Law 103-354 
office) will be collected from the loan applicants before credit reports 
are ordered, except in the case of section 504 loan applicants and 
section 502 Rural Housing Loan applicants whose requested loan will 
likely not exceed $7,500. It is the policy not to order credit reports 
for Rural Housing loans of $7,500, or less, but if the County Supervisor 
determines that a credit report is necessary, it will be ordered at no 
cost to the loan applicant as provided for in Sec. 1910.53(g) of subpart 
B of part 1910 of this chapter.

[53 FR 35671, Sept. 14, 1988, as amended at 54 FR 11365, Mar. 20, 1989; 
55 FR 21524, May 25, 1990; 56 FR 66959, Dec. 27, 1991; 58 FR 226, Jan. 
5, 1993; 58 FR 44263, Aug. 20, 1993; 61 FR 35919, July 9, 1996; 62 FR 
9353, Mar. 3, 1997]



Sec. 1910.4  Processing applications.

    When obtaining information concerning applicants and evaluating 
their qualifications, FmHA or its successor agency under Public Law 103-
354 personnel will be covered by the provisions of ECOA and the 
established policies for the various types of assistance offered by FmHA 
or its successor agency under Public Law 103-354. If a farm is situated 
in more than one State, County or Parish, the loan will be processed in 
the State, County or Parish where the applicant's principal residence on 
the farm is located. If the applicant's residence is not located on the 
farm or if the applicant is a corporation, cooperative, partnership or 
joint operation, the loan will be processed by the County Office serving 
the County in which the farm or a major portion of the farm is located, 
unless otherwise approved by the State Office. Applications of FmHA or 
its successor agency under Public Law 103-354 employees, members of 
their families, close relatives, or business or close personal 
associates are processed according to subpart D of part 1900 of this 
chapter.
    (a) Completed RH applications. Completed applications are those as 
described in Sec. 1944.27 (copies available in any REDC office), and all 
applications for Rural Housing loans will be processed as outlines in 
that instruction.
    (b) Completed Farm Credit Programs applications and additional FSA 
responsibilities. All persons requesting an application will be provided 
exhibit A (available in any office). The County Supervisor will provide 
assistance as necessary to help applicants complete their applications. 
Complete applications will be processed in the order of date received, 
except as outlined in Sec. 1910.10 of this subpart. If the application 
is complete when it is first received, a County Office official will 
stamp the filing date on the front of Form FmHA 410-1 and enter the date 
in the ``Application Received'' and ``Application Completed'' fields in 
the Application Processing Module of the Management Records Systems 
(MRS.) On the date all information necessary to process an application 
is received, a County Office official will send the applicant FmHA Guide 
Letter 1910-A-3 (available in any office) notifying the applicant that 
the application is considered complete. The date entered in the 
``Application Completed'' field in the Application Processing Module of 
MRS will establish the 30-day and 60-day timeframes for determining 
eligibility and loan approval/disapproval, respectively. The County 
Supervisor will verify the information furnished by the applicant, and 
record and assemble additional information needed to properly evaluate 
the applicant's qualifications and credit needs. Additional information 
may be obtained and verified by County Office records, personal 
contacts, and visits to the applicant's operation. A complete Farm Loan 
Programs application requires fulfillment of both the applicant and FSA 
responsibilities, except as provided in paragraph (c) of this section. 
Once this information is received and the application is considered 
complete, FSA has additional responsibilities before loan approval is 
determined. The various responsibilities are as follows:

[[Page 75]]

         Applicant's Responsibilities for a Complete Application

    (1) Completed Form FmHA 410-1, ``Application for FmHA Services,'' 
including a signed Form FmHA 410-9, ``Statement Required by the Privacy 
Act.''
    (2) If the applicant is a cooperative, corporation, partnership, or 
joint operation:
    (i) A complete list of members, stockholders, partners or joint 
operators showing the address, citizenship, principal occupation, and 
the number of shares and percentage of ownership or of stock held in the 
cooperative or corporation, by each, or the percentage of interest held 
in the partnership or joint operation, by each.
    (ii) A current personal financial statement from each of the members 
of a cooperative, stockholders of a corporation, partners of a 
partnership, or joint operators of a joint operation.
    (iii) A current financial statement from the cooperative, 
corporation, partnership, or joint operation itself.
    (iv) A copy of the cooperative's or corporation's charter, or any 
partnership or joint operation agreement, any articles of incorporation 
and bylaws, any certificate or evidence of current registration (good 
standing), and a resolution(s) adopted by the Board of Directors or 
members or stockholders authorizing specified officers of the 
cooperative, corporation, partnership, or joint operation to apply for 
and obtain the desired loan and execute required debt, security, and 
other instruments and agreements.
    (3) A brief written description as to the farm training and/or 
experience of the applicant and the individual members of an entity 
applicant (new applicants only). If a waiver from the training required 
in Section 1924.74 of subpart B of part 1924 of this chapter is 
requested, provide verification of any courses taken which covered 
production and/or financial management concepts, and/or a statement 
explaining how the applicant's proven performance based on 5-year 
production records demonstrates production ability.
    (4) Supporting and documented verification that the applicant (and 
all members of an entity applicant) cannot obtain credit elsewhere, 
including a guaranteed loan.
    (5) Financial records for the past five years. Income tax records 
may be provided by the applicant when other financial records are not 
available.
    (6) Five years of production history immediately preceding the year 
of application, unless the applicant has been farming less than 5 years.
    (7) A brief written description of the proposed operation and the 
proposed size of the operation (required for new applicants and existing 
borrowers with significant changes in their operations).
    (8) Verification of off-farm employment, if any. This will be used 
only when the applicant is relying on off-farm income to pay part of the 
applicant's expenses.
    (9) Projected production, income and expenses, and loan repayment 
plan, which may be submitted on Form FmHA 431-2, ``Farm and Home Plan,'' 
or other similar plans of operation acceptable to FSA.
    (10) Applicable items required in exhibit M of subpart G of part 
1940 of this chapter including SCS Form CPA-026, ``Highly Erodible Land 
and Wetland Conservation Determination,'' Form AD-1026, ``Highly 
Erodible Land Conservation (HELC) and Wetland Conservation (WC) 
Certification,'' and Form FmHA 1940-20, as required by subpart G of part 
1940 of this chapter.
    (11) A legal description of farm, real estate property and/or (if 
applicable) a copy of any lease, contract, option or agreement entered 
into by the applicant which may be pertinent to consideration of the 
application, or when a written lease is not obtainable, a statement 
setting forth the terms and conditions of the agreement.
    (12) Form FmHA 440-32, ``Request for Statement of Debts and 
Collateral,'' when applicable.
    (13) Forms FmHA 1945-22, ``Certification of Disaster Losses,'' and 
FmHA 1940-38, ``Request for Lender's Verification of Loan Application,'' 
(EM loans only).

            FSA's Responsibilities for a Complete Application

    (14) Send Form FmHA 410-7, ``Notification to Applicant on Use of 
Financial

[[Page 76]]

Information from Financial Institution,'' to the applicant when 
applicable.
    (15) Form FmHA 1945-26, ``Calculation of Actual Losses'' (EM loans 
only).
    (16) Credit reports as provided in subparts B and C of this part.
    (17) Form FmHA 1945-29, ``ASCS Verification of Farm Acreages, 
Production and Benefits,'' (EM loans only).
    (18) The Current/Past Debt Inquiry and Borrower Cross-Reference 
Systems. The Current/Past Debt Inquiry System must be reviewed for each 
application and copies of the screens must be attached to the 
applicant's file.

               Additional FSA Farm Credit Responsibilities

    (19) Form FmHA 1924-1, ``Development Plan,'' if necessary.
    (20) Form FmHA 1940-22, ``Environmental Checklist for Categorical 
Exclusions,'' or Class I and Class II assessment, whichever is 
applicable.
    (21) Real estate and chattel appraisal, when applicable.
    (22) Completion of the assessment in accordance with Sec. 1924.55.
    (c) Low-Documentation (Lo-Doc) Operating Loans:
    (1) To qualify for loan processing under Lo-Doc provisions, an 
applicant must:
    (i) Be current on all payments to all creditors including FSA (if an 
FSA borrower);
    (ii) Have not received primary loan servicing or disaster set-aside 
on any FSA debt within the past 5 years; and
    (iii) Meet one of the following criteria:
    (A) The loan requested is $50,000 or less and the total outstanding 
FSA operating loan debt at the time of loan closing will be less than 
$100,000; or
    (B) The loan is requested to pay annual operating expenses and the 
applicant is an existing FSA borrower who has received and repaid as 
scheduled, at least two previous annual operating loans from the agency.
    (2) A complete Lo-Doc OL application will consist of the items 
listed in paragraphs (b)(1), (b)(2), (b)(9), (b)(10), and (b)(16) of 
this section. The Agency may require a Lo-Doc applicant to submit any 
other information listed under paragraph (b) of this section as needed 
to make a determination on the loan application.
    (d) Notifying applicants that direct loan eligibility is subject to 
the unavailability of guaranteed financing. If the assessment, completed 
in accordance with Sec. 1924.55 concludes that guaranteed assistance may 
be available, with or without interest assistance, a prospectus will be 
sent to area lenders in accordance with Sec. 1951.262(f) as appropriate. 
If a lender indicates interest in providing financing with a Farm Credit 
Programs loan guarantee, refer to Sec. 1980.113(c) for handling as a 
market placement application. No direct loan to a current borrower will 
be approved until the process outlined in this paragraph has been 
concluded.
    (e) Incomplete Farm Credit Programs applications. (1) When an 
incomplete application is received, a County Office official will stamp 
the filing date on the front of Form FmHA 410-1, and enter the date in 
the ``Application Received'' and ``Incomplete Application'' fields in 
the Application Processing Module of MRS.
    (2) When an application that was received incomplete is completed, 
the date will be entered in the ``Application Completed'' field in the 
Application Processing Module of MRS. The County Supervisor will follow 
the requirements of paragraph (b) of this section.
    (3) Applicants who do not submit necessary information for complete 
applications, as described in paragraph (b) of this section, for EM, FO, 
OL and SW loans, will be handled as follows:
    (i) No later than 10 calendar days after receipt of the application, 
the County Supervisor will send the applicant a letter similar to FmHA 
Guide Letter 1910-A-1. The letter will:
    (A) List the additional information needed.
    (B) State that the application cannot be processed until all 
required information is received in the FmHA or its successor agency 
under Public Law 103-354 County Office.
    (C) Set a specific due date for the information. This date will be 
20 calendar days after the date of the letter.

[[Page 77]]

    (ii) When information is needed from other USDA Agencies, the County 
Supervisor will inform those Agencies and the applicant of the 
information needed, and note the date of the request in the running 
record. For operating loan applications, the County Supervisor will 
request that the Agencies return the information to the County Office 
within 15 calendar days of the date of receipt of the request.
    (iii) If the necessary information has not been received from the 
applicant 20 calendar days after the date of the first written 
notification of an incomplete application, the County Supervisor will 
immediately send the applicant a letter similar to FmHA Guide Letter 
1910-A-2.
    (A) The letter will again list the additional information needed, 
and state that the application cannot be processed until all the 
required information is received.
    (B) The letter will set a due date of 10 calendar days from the date 
of the letter. It will further state that unless the applicant supplies 
the required information or contacts the County Office by that date, the 
application will be withdrawn without further notice.
    (C) This letter will contain the Equal Credit Opportunity Act (ECOA) 
statement set forth in Sec. 1910.6(b)(1) of this subpart.
    (D) A copy of this letter must be sent to the District Office at the 
same time it is sent to the applicant.
    (iv) If the applicant has not contacted the County Office by the due 
date set in the second notification letter, the County Supervisor will 
then withdraw the application.
    (v) All applications withdrawn will be handled in accordance with 
Sec. 2033.7 of FmHA Instruction 2033-A.
    (f) Notifying applicants (including presently indebted borrowers) 
about Limited Resource loans. Immediately after an application for OL, 
FO, SW, or EM assistance is received, the County Supervisor will send a 
letter similar to Guide Letter 1924-B-1 to the applicant telling the 
applicant about Limited Resource loans.
    (g) Notifying socially disadvantaged applicants regarding the 
availability of Direct Farm Ownership (FO) loans. Immediately after an 
application for FO assistance is received, the County Supervisor will 
send exhibit B of this subpart, ``Letter to Notify Socially 
Disadvantaged Applicants/Borrowers Regarding the Availability of 
Acquired Farmland,'' to the applicants. Exhibit B will also be presented 
to all socially disadvantaged individuals at the time they make their 
initial contact regarding Agency credit services. Socially disadvantaged 
applicants are defined in Sec. 1943.4 of subpart A of part 1943 of this 
chapter.
    (h) Notifying Borrowers about Farm Credit Programs (FCP) Borrower 
Responsibilities. When an application for OL, FO, SW or EM assistance is 
approved, the County Supervisor will provide to the borrower exhibit C 
of this subpart, ``Letter to Notify Applicant(s)/Borrower(s) of Their 
Responsibilities in Connection with FmHA Farmer Programs Loans.''
    (i) Determining eligibility. The Agency will determine eligibility 
of all Farm Credit Programs applicants including those who are already 
indebted for a Farm Credit Programs loan. The Farm Credit Programs 
application does not need to be complete before it is reviewed; however, 
all information relative to the eligibility decision must be received. 
The Rural Housing Service will determine eligibility for all RH loan 
applicants.
    (1) The Agency will certify whether or not the applicant meets the 
eligibility requirements and whether or not the applicant is a beginning 
farmer or rancher, as defined in the applicable Farm Credit Programs 
loan making regulation. An eligible Operating Loan (OL) or Farm 
Ownership (FO) Loan applicant, who is considered a beginning farmer or 
rancher, will have access to targeted funds. An eligible FO applicant 
requesting to purchase suitable farmland, who is considered a beginning 
farmer or rancher, will be given priority in accordance with 
Sec. 1955.107 (f). In addition, it is the responsibility of the Agency 
to determine whether or not the FO applicant is an operator of not 
larger than a family size farm, as of the time immediately after the 
contract of sale or lease is entered into, even though the applicant is 
not in

[[Page 78]]

need of Agency credit assistance on eligible rates and terms to purchase 
suitable farmland. The loan approval official will determine the 
applicant's projected repayment ability, the adequacy of collateral 
equity to secure the requested loan, and the feasibility of the proposed 
operation.
    (2) An outstanding judgment obtained by the United States in a 
Federal Court (other than the United States Tax Court), which has been 
recorded, shall cause the applicant to be ineligible for any loan or 
grant until the judgment is paid in full or otherwise satisfied. Agency 
loan or grant funds may not be used to satisfy the judgment.
    (i) Timeliness. Processing requirements for each program area are as 
follows:
    (1) Farm Credit Programs (FCP) applications. Each application must 
be approved or disapproved and the applicant notified in writing of the 
action taken, not later than 60 days after receipt of a complete 
application. The District Director will monitor the processing of all 
applications to ensure that each is processed in a timely manner and 
receives a final disposition (i.e., approval, rejection, or withdrawal) 
within the timeframes outlined in this section.
    (i) Receipt by the applicant of a signed copy of Form FmHA 1940-1, 
``Request for Obligation of Funds,'' will be considered written notice 
of loan approval.
    (ii) If a complete application is not approved or disapproved 45 
calendar days after all necessary information is received, the following 
steps will be taken:
    (A) The County Supervisor will make sure that the data in the County 
Office MRS data base regarding the application are up-to-date, and that 
the reason it remains pending is noted. A selection of reasons is listed 
in MRS.
    (B) Every week the District Director will generate a report, using 
the FOCUS Ad-Hoc Reporting System, based on the weekly upload of 
information from each county office MRS data base. The District Director 
will note each complete application pending more than 45 calendar days, 
and immediately take steps to ensure that final disposition on the 
application is taken no later than 60 calendar days after receipt of the 
complete application.
    (C) The Administrator will utilize MRS data and any other 
information available to comply with any statutory reporting 
requirements concerning the status of applications.
    (2) Single Family Housing (SFH) loans. Written notice of eligibility 
or ineligibility will be sent to each applicant not later than 30 days 
after receipt of a complete application. If a determination of 
eligibility cannot be made within 30 days from the date of receipt of 
the complete application, the applicant will be notified in writing of 
the circumstances causing the delay and the approximate time needed to 
make a decision.
    (3) Labor Housing (LH) preapplications. Preapplications must be 
determined eligible and feasible and the applicant notified in writing 
in accordance with applicable program regulations not later than 45 days 
after receipt of a complete preapplication. This eligibility 
determination will be made regardless of funding levels.
    (4) LH applications. If a determination of eligibility cannot be 
made within 30 days from the date of receipt of a complete application, 
the applicant will be notified in writing of the circumstances causing 
the delay and the approximate time needed to make a decision.
    (5) Adverse decisions. If an applicant is given an adverse decision, 
the applicant will be given appeal rights as provided in subpart B of 
part 1900 or 7 CFR part 780, as appropriate. The letter will contain the 
ECOA statement set forth in Sec. 1910.6(b)(1) of this subpart.
    (k) [Reserved]
    (l) Active applications. An applicant may voluntarily withdraw an 
application at any time. Except for incomplete Farm Credit Programs 
applications, when an applicant has been determined eligible, but 
further processing is delayed due to an apparent lack of interest, the 
applicant will be advised by letter that the application will be 
considered withdrawn unless the County Office receives a written request 
within 30 days that further consideration is desired. The letter to the

[[Page 79]]

borrower will contain the ECOA statement set forth in Sec. 1910.6(b)(1) 
of this subpart.
    (1) Applications for RH, RHS, and LH loans (posted on Form FmHA 
1905-4, ``Application and Processing Card--Individual,'' or inputted in 
the Application Processing Module of MRS) received during any fiscal 
year will remain active during the remainder of that fiscal year in 
which they were received, plus the subsequent fiscal year, unless 
withdrawn or disapproved, or unless the loan is closed.
    (2) Applications received for FO, SW, OL, EM, and persons applying 
for RH loans on farms or nonfarm tracts who derive a major portion of 
their income from farming (inputted in the Application Processing Module 
of MRS), will remain active for 12 months from the date a complete 
application is received, unless withdrawn or disapproved, or unless the 
loan is closed.
    (3) See paragraph (d) of this section for procedures for incomplete 
Farm Credit Programs applications.
    (4) All applications which are withdrawn or rejected will be handled 
in accordance with Sec. 2033.7 of the Agency Instruction 2033-A. If 
notice has been received by the Agency that an adverse action is under 
investigation or in litigation, that application and all related 
material will be retained until final disposition of the matter.
    (5) When an application has been approved and funds are not 
available, and the steps outlined in Sec. 1910.6(g) of this subpart have 
been taken, the following provisions apply:
    (i) The County Supervisor will, during the 11th month following loan 
approval, notify the applicant that the application will expire 12 
months from the date of loan approval.
    (ii) If the applicant wants the application to remain active, the 
applicant must provide the County Office with a written request within 
30 days, requesting that the application remain active.
    (iii) The applications retained at the applicant's request will be 
extended for only one additional 12-month period.
    (iv) If the applicant fails to respond to the County Supervisor's 
written request, the application will be withdrawn.

[53 FR 35671, Sept. 14, 1988, as amended at 55 FR 21525, May 25, 1990; 
55 FR 29560, July 20, 1990; 55 FR 46188, Nov. 2, 1990; 56 FR 66959, Dec. 
27, 1991; 57 FR 19523, May 7, 1992; 58 FR 226, Jan. 5, 1993; 58 FR 
44746, Aug. 25, 1993; 58 FR 48283, Sept. 15, 1993; 58 FR 68719, Dec. 29, 
1993; 58 FR 69195, Dec. 30, 1993; 60 FR 55122, Oct. 27, 1995; 61 FR 
35920, July 9, 1996; 62 FR 9353, Mar. 3, 1997; 66 FR 1572, Jan. 9, 2001]



Sec. 1910.5  Evaluating applications.

    The following criteria will be considered in addition to the 
eligibility criteria in applicable program regulations.
    (a) Age of applicant. When evaluating the application, the age of 
the applicant will not be used as a consideration of eligibility 
(provided the applicant has reached the legal age of majority in the 
State, or has had the minority removed by court action) except when a 
specific age is being used to the advantage of the applicant (e.g. 
assistance under the 504 grant program).
    (b) Credit history. Credit history will be a consideration to the 
extent that it is used in evaluating all applicants for similar types 
and amounts of credit. For instance, credit requirements for a female 
applicant will not differ from those for a male applicant.
    (c) When the applicant, including any members of an entity 
applicant, caused the Agency a loss by receiving debt forgiveness, they 
are ineligible for assistance in accordance with applicable program 
eligibility regulations. If the debt forgiveness is cured by repayment 
of the Agency's loss, the Agency may still consider the debt forgiveness 
in determining the applicant's creditworthiness. The following 
circumstances do not automatically indicate an unacceptable credit 
history:
    (1) Foreclosures, judgments, delinquent payments of the applicant 
which occurred more than 36 months before the application, if no recent 
similar situations have occurred, or Agency delinquencies that have been 
resolved through loan service programs as defined in Sec. 1951.906 of 
part 1951 of subpart S of this chapter.
    (2) Isolated incidents of delinquent payments which do not represent 
a general pattern of unsatisfactory or slow payment.

[[Page 80]]

    (3) ``No history'' of credit transactions by the applicant.
    (4) Recent foreclosure, judgment or delinquent payment when the 
applicant can satisfactorily demonstrate that:
    (i) The circumstances causing any of the above were of a temporary 
nature and were beyond the applicant's control. Example: loss of job; 
delay or reduction in government benefits, or other loss of income; 
increased living expenses due to illness, death, etc.
    (ii) The adverse action or delinquency was the result of a refusal 
to make full payment because of defective goods or services or as a 
result of some other justifiable dispute relating to the goods or 
services purchased or contracted for.
    (5) Non-payment of a debt due to circumstances beyond the 
applicant's or borrower's control. However, non-payment of a debt due to 
circumstances within an applicant's or borrower's control may be used as 
an indication of unacceptable credit history, in accordance with 
paragraph (c)(1) of this section. The mere fact that an applicant or 
borrower filed bankruptcy will not be used as an indication of 
unacceptable credit history. The circumstances causing the nonpayment of 
debt, i.e., whether nonpayment was beyond the applicant's or borrower's 
control, however, are proper considerations.
    (d) Current/Past FmHA or its successor agency under Public Law 103-
354 Loan History. Current or previous delinquent FmHA or its successor 
agency under Public Law 103-354 loans, as determined by reviewing the 
Current/Past Debt Inquiry System or the Borrower Cross-Reference Inquiry 
System, will be used to help determine the credit history of an 
applicant.
    (e) Delinquency on a Federal debt. The Department of Housing and 
Urban Development Credit Alert Interactive Voice Response System 
(CAIVRS) will be used to help determine if an applicant is deliquent on 
any Federal debt.

[53 FR 35671, Sept. 14, 1988, as amended at 55 FR 21525, May 25, 1990; 
55 FR 46188, Nov. 2, 1990; 56 FR 10147, Mar. 11, 1991; 60 FR 55122, Oct. 
27, 1995; 61 FR 1109, Jan. 16, 1996; 61 FR 2899, Jan. 30, 1996; 61 FR 
35921, July 9, 1996; 62 FR 28618, May 27, 1997]



Sec. Sec. 1910.6-1910.9  [Reserved]



Sec. 1910.10  Preference.

    (a) Veterans. (1) Veteran's preference is given to any person 
applying for an RH, FO, SW, or OL loan who has been honorably 
discharged, including clemency discharges, or released from the active 
forces of the U.S. Army, Navy, Air Force, Marine Corps, or Coast Guard, 
and who served during a period of war, as defined in 38 U.S.C. 101(12).
    (2) Veteran's preference will apply when:
    (i) There is a shortage of funds.
    (ii) Obligating forms are ready to be submitted to the Finance 
Office, and
    (iii) There is more than one application having the same date.
    (3) For Rural Housing applicants, veteran's preference will be 
extended to the spouses and children of deceased servicemen who died in 
service during one of the periods listed in paragraph (a)(1) of this 
section.
    (b) Farm Credit Programs (FCP) loans. In addition to the veteran's 
preference, the preference set out in Sec. 1943.10 of subpart A of part 
1943 of this chapter applies.

[53 FR 35671, Sept. 14, 1988, as amended at 61 FR 35922, July 9, 1996; 
62 FR 9353, Mar. 3, 1997]



Sec. 1910.11  Special requirements.

    (a) Servicemen's Readjustment Act of 1944. Section 512(a)(D) of the 
Servicemen's Readjustment Act of 1944, as amended, provides that an 
applicant for a direct housing loan from the Department of Veterans 
Affairs (VA) must be ``unable to obtain a loan for such purposes from 
the Secretary of Agriculture under the Consolidated Farm and Rural 
Development Act, as amended, or the Housing Act of 1949, as amended.'' 
Department of Veterans Affairs Loan Guaranty Officers may, therefore, 
require VA loan applicants to apply to the agency for loan assistance.
    (b) Veterans determined ineligible by the Agency. If the veteran is 
unable to obtain a loan, the County Supervisor will, upon request, 
furnish the applicant with a rejection letter to be presented to the 
Loan Guaranty Officer. The Loan Guaranty Officer may consult with the 
County Supervisor regarding the investigation made by the

[[Page 81]]

Agency of the veteran's application and the specific reasons for 
rejection.

[61 FR 35922, July 9, 1996]



Secs. 1910.12-1910.49  [Reserved]



Sec. 1910.50  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number 0575-0134. Public reporting burden 
for this collection of information is estimated to vary from 20 minutes 
to 2 hours per response including time for
    reviewing instructions, searching existing data sources, gathering 
and maintaining the data needed, and completing and reviewing the 
collection of information. Send comments regarding this burden estimate 
or any other aspect of collection of this information, including 
suggestions for reducing this burden, to Department of Agriculture, 
Clearance Officer, OIRM, room 404-W, Washington, DC 20250; and to the 
Office of Management and Budget, Paperwork Reduction Project (OMB 
 0575-0134), Washington, DC 20503.

[57 FR 19523, May 7, 1992]

              Exhibit A to Subpart A of Part 1910[Reserved]

     Exhibit B to Subpart A of Part 1910--Letter to Notify Socially 
Disadvantaged Applicants/Borrowers Regarding the Availability of Direct 
  Farm Ownership (FO) Loans and the Acquisition/Leasing of FmHA or Its 
       Successor Agency Under Public Law 103-354 Acquired Farmland

                 United States Department of Agriculture

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

(Insert address)

Date --------
    Dear --------:
    The Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 has authority under the Consolidated Farm and Rural 
Development Act to target direct farm ownership (FO) loan funds to 
applicants/borrowers of socially disadvantaged groups. This program 
provides credit to applicants/borrowers of socially disadvantaged 
groups, at regular or reduced interest rates, to purchase or enlarge 
farms. In addition, the program provides that FmHA or its successor 
agency under Public Law 103-354 acquired farmland be made available for 
sale or lease to applicants/borrowers of socially disadvantaged groups. 
Socially disadvantaged borrowers with existing direct FO loans may have 
their accounts deferred and/or reamortized at a reduced interest rate.
    If you would like additional information regarding the availability 
of direct FO loans to, and/or the renting or buying of FmHA or its 
successor agency under Public Law 103-354 acquired farmland by, members 
of socially disadvantaged groups, you should contact my office.
    Sincerely,
    County Supervisor.

[57 FR 19523, May 7, 1992]

   Exhibit C to Subpart A of Part 1910--Letter to Notify Applicant(s)/
  Borrower(s) of Their Responsibilities in Connection with FmHA or Its 
     Successor Agency Under Public Law 103-354 Farmer Program Loans

    Note: Exhibit C, referenced in this subpart, is available in any 
FmHA or its successor agency under Public Law 103-354 office.



                 Subpart B--Credit Reports (Individual)

    Source: 49 FR 40790, Oct. 18, 1984, unless otherwise noted.



Sec. 1910.51  Purpose.

    This subpart prescribes the policies and procedures of the Farmers 
Home Administration (FmHA) or its successor agency under Public Law 103-
354 for individual and joint type credit reports. Credit reports will be 
ordered to determine the eligibility of applicants requesting Farmers 
Home Administration (FmHA) or its successor agency under Public Law 103-
354 loans. A nonrefundable fee will be charged the applicant.

[55 FR 46188, Nov. 2, 1990]



Sec. 1910.52  [Reserved]



Sec. 1910.53  Policy.

    The County Supervisor will be responsible for ordering individual 
credit reports. These will be obtained on initial and rescheduled Farmer 
Program

[[Page 82]]

loans and on all initial Single Family Housing applications, except for 
those situations outlined in paragraph (c) of this section, to help 
determine the eligibility of the loan applicant, and when it appears the 
credit report will not have to be updated before loan closing.

[55 FR 46188, Nov. 2, 1990]



Secs. 1910.54-1910.100  [Reserved]



                  Subpart C--Commercial Credit Reports

    Source: 52 FR 6498, Mar. 4, 1987, unless otherwise noted.



Sec. 1910.101  Preface.

    FmHA or its successor agency under Public Law 103-354 Instruction 
1910-C (available in any Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 office) describes the 
procedure to be used by FMHA in obtaining commercial credit reports. A 
nonrefundable fee, set forth in Sec. 1910.106(d) of this Instruction 
will be collected from the applicant, general contractor or dealer 
contractor who is the subject of the report.



Secs. 1910.102-1910.150  [Reserved]

                          PART 1922 [RESERVED]



PART 1924--CONSTRUCTION AND REPAIR--Table of Contents




  Subpart A--Planning and Performing Construction and Other Development

Sec.
1924.1  Purpose.
1924.2  [Reserved]
1924.3  Authorities and responsibilities.
1924.4  Definitions.
1924.5  Planning development work.
1924.6  Performing development work.
1924.7  [Reserved]
1924.8  Development work for modular/panelized housing units.
1924.9  Inspection of development work.
1924.10  Making changes in the planned development.
1924.11  District Director's review of incomplete development.
1924.12  Warranty of development work.
1924.13  Supplemental requirements for more complex construction.
1924.14-1924.48  [Reserved]
1924.49  State supplements.
1924.50  OMB control number.

Exhibit A to Subpart A--Estimated Breakdown of Dwelling Costs for 
          Estimating Partial Payments
Exhibit B to Subpart A--Requirements for Modular/Panelized Housing Units
Exhibit C to Subpart A--Guide for Drawings and Specifications
Exhibit D to Subpart A--Thermal Performance Construction Standards
Exhibit E to Subpart A--Voluntary National Model Building Codes
Exhibit F to Subpart A--Payment Bond
Exhibit G to Subpart A--Performance Bond
Exhibit H to Subpart A--Prohibition of Lead-Based Paints
Exhibit I to Subpart A--Guidelines for Seasonal Farm Labor Housing
Exhibit J to Subpart A--Manufactured Home Sites, Rental Projects and 
          Subdivisions: Development, Installation and Set-Up
Exhibit K to Subpart A--Classifications for Multi-Family Residential 
          Rehabilitation Work
Exhibit L to Subpart A--Insured 10-Year Home Warranty Plan Requirements

   Subpart B--Management Advice to Individual Borrowers and Applicants

1924.51  General.
1924.52-1924.53  [Reserved]
1924.54  Definitions.
1924.55  Assessment of the agricultural operation.
1924.56  Farm business planning.
1924.57  [Reserved]
1924.58  Recordkeeping.
1924.59  Supervision.
1924.60  Nonfarm enterprises.
1924.61-1924.73  [Reserved]
1924.74  Borrower Training program.
1924.75-1924.99  [Reserved]
1924.100  OMB control number.
Exhibit A to Subpart B--Letter to Borrower Regarding Releases of Farm 
          Income To Pay Family Living and Farm Operating Expenses

        Subpart C--Planning and Performing Site Development Work

1924.101  Purpose.
1924.102  General policy.
1924.103  Scope.
1924.104  Definitions.
1924.105  Planning/performing development.
1924.106  Location.
1924.107  Utilities.
1924.108  Grading and drainage.
1924.109-1924.114  [Reserved]
1924.115  Single Family Housing site evaluation.
1924.116-1924.118  [Reserved]
1924.119  Site Loans.

[[Page 83]]

1924.120-1924.121  [Reserved]
1924.122  Exception authority.
1924.123-1924.149  [Reserved]
1924.150  OMB Control Number.
Exhibit A to Subpart C [Reserved]
Exhibit B to Subpart C--Site Development Design Requirements
Exhibit C to Subpart C--Checklist of Visual Exhibits and Documentation 
          for RRH, RCH, and LH Proposals

Subparts D-E [Reserved]

     Subpart F--Complaints and Compensation for Construction Defects

1924.251  Purpose.
1924.252  Policy.
1924.253  Definitions.
1924.254-1924.257  [Reserved]
1924.258  Notification of borrowers.
1924.259  Handling dwelling construction complaints.
1924.260  Handling manufactured housing (unit) construction complaints.
1924.261  Handling complaints involving dwellings covered by an 
          independent or insured home warranty plan.
1924.262  Handling complaints involving dwellings constructed by the 
          self-help method.
1924.263-1924.264  [Reserved]
1924.265  Eligibility for compensation for construction defects.
1924.266  Purposes for which claims may be approved.
1924.267-1924.270  [Reserved]
1924.271  Processing applications.
1924.272  [Reserved]
1924.273  Approval or disapproval.
1924.274  Final inspection.
1924.275  [Reserved]
1924.276  Action against contractor.
1924.277-1924.299  [Reserved]
1924.300  OMB control number.

    Authority: 5 U.S.C. 301; 7 U.S.C 1989; 42 U.S.C 1480.



  Subpart A--Planning and Performing Construction and Other Development

    Source: 52 FR 8002, Mar. 13, 1987, unless otherwise noted.



Sec. 1924.1  Purpose.

    This subpart prescribes the basic Farmers Home Administration (FmHA) 
or its successor agency under Public Law 103-354 policies, methods, and 
responsibilities in the planning and performing of construction and 
other development work for insured Rural Housing (RH), insured Farm 
Ownership (FO), Soil and Water (SW), Softwood Timber (ST), single unit 
Labor Housing (LH), and Emergency (EM) loans for individuals. It also 
provides supplemental requirements for Rural Rental Housing (RRH) loans, 
Rural Cooperative Housing (RCH) loans, multi-unit (LH) loans and grants, 
and Rural Housing Site (RHS) loans.

[53 FR 35679, Sept. 14, 1988]



Sec. 1924.2  [Reserved]



Sec. 1924.3  Authorities and responsibilities.

    The County Supervisor and District Director are authorized to 
redelegate, in writing, any authority delegated to them in this subpart 
to the Assistant County Supervisor and Assistant District Director, 
respectively, when determined to be qualified. FmHA or its successor 
agency under Public Law 103-354 Construction Inspectors, District Loan 
Assistants, and County Office Assistants are authorized to perform 
duties under this subpart as authorized in their job descriptions.



Sec. 1924.4  Definitions.

    (a) Construction. Such work as erecting, repairing, remodeling, 
relocating, adding to or salvaging any building or structure, and the 
installation or repair of, or addition to, heating and electrical 
systems, water systems, sewage disposal systems, walks, steps, 
driveways, and landscaping.
    (b) Contract documents. The borrower-contractor agreement, the 
conditions of the contract (general, supplementary, and other), the 
drawings, specifications, warranty information, all addenda issued 
before executing the contract, all approved modifications thereto, and 
any other items stipulated as being included in the contract documents.
    (c) Contractor. The individual or organization with whom the 
borrower enters into a contract for construction or land development, or 
both.
    (d) County Supervisor and District Director. In Alaska, for the 
purpose of this subpart, ``County Supervisor'' and ``District Director'' 
also mean ``Assistant Area Loan Specialist'' and ``Area Loan 
Specialist,'' respectively. The terms also include other qualified staff

[[Page 84]]

who may be delegated responsibilities under this subpart in accordance 
with the provisions of subpart F of part 2006 (available in any FmHA or 
its successor agency under Public Law 103-354 office).
    (e) Date of commencement of work. The date established in a ``Notice 
to Proceed'' or, in the absence of such notice, the date of the contract 
or other date as may be established in it or by the parties to it.
    (f) Date of substantial completion. The date certified by the 
Project Architect/Engineer or County Supervisor when it is possible, in 
accordance with any contract documents and applicable State or local 
codes and ordinances, and the FmHA or its successor agency under Public 
Law 103-354 approved drawings and specifications, to permit safe and 
convenient occupancy and/or use of the buildings or other development.
    (g) Development. Construction and land development.
    (h) Development standards. Any of the following codes and standards:
    (1) A standard adopted by FmHA or its successor agency under Public 
Law 103-354 for each state in accordance with Sec. 1924.5(d)(1)(i)(E) of 
this subpart.
    (2) Voluntary national model building codes (model codes). 
Comprehensive documents created, referenced or published by nationally 
recognized associations of building officials that regulate the 
construction, alteration and repair of building, plumbing, mechanical 
and electrical systems. These codes are listed in exhibit E of this 
subpart.
    (3) Minimum Property Standards (MPS). The Department of Housing and 
Urban Development (HUD) Minimum Property Standards for Housing, Handbook 
4910.1, 1984 Edition with Changes. (For One and Two Family Dwellings and 
Multi-Family Housing).
    (i) Identity of interest. Identity of interest will be construed as 
existing between the applicant (the party of the first part) and general 
contractors, architects, engineers, attorneys, subcontractors, material 
suppliers, or equipment lessors (parties of the second part) under any 
of the following conditions:
    (1) When there is any financial interest of the party of the first 
part in the party of the second part. The providing of normal 
professional services by architects, engineers, attorneys or accountants 
with a client-professional relationship shall not constitute an identity 
of interest.
    (2) When one or more of the officers, directors, stockholders or 
partners of the party of the first part is also an officer, director, 
stockholder, or partner of the party of the second part.
    (3) When any officer, director, stockholder or partner of the party 
of the first part has any financial interest whatsoever in the party of 
the second part.
    (4) Between the spouse, significant other, relatives, and step-
relatives of the principal owners of the party of the first part and its 
management, such as Grandmother, Aunt, Daughter, Granddaughter, 
Grandfather, Uncle, Son, Grandson, Mother, Sister, Niece, Cousin, 
Father, Brother, Nephew;
    (5) When the party of the second part advances any funds to the 
party of the first part.
    (6) When the party of the second part provides and pays on behalf of 
the party of the first part the cost of any legal services, 
architectural services or engineering services other than those of a 
surveyor, general superintendent, or engineer employed by a general 
contractor in connection with obligations under the construction 
contract.
    (7) When the party of the second part takes stock or any interest in 
the party of the first part as part of the consideration to be paid 
them.
    (8) When there exist or come into being any side deals, agreements, 
contracts or undertakings entered into thereby altering, amending, or 
cancelling any of the required closing documents except as approved by 
FmHA or its successor agency under Public Law 103-354.
    (9) An identity of interest will also exist when another party can 
significantly influence the management or operating policies of the 
transacting parties or if it has an ownership interest in one of the 
transacting parties and can significantly influence the other to an 
extent that one or more of the transacting parties might be prevented 
from fully pursuing its own separate interests.

[[Page 85]]

    (j) Land development. Includes items such as terracing, clearing, 
leveling, fencing, drainage and irrigation systems, ponds, forestation, 
permanent pastures, perennial hay crops, basic soil amendments, 
pollution abatement and control measures, and other items of land 
improvement which conserve or permanently enhance productivity. Also, 
land development for structures includes the applicable items above, and 
items such as rough and finish grading, retaining walls, water supply 
and waste disposal facilities, streets, curbs and gutters, sidewalks, 
entrancewalks, driveways, parking areas, landscaping and other related 
structures.
    (k) Manufactured housing. Housing, constructed of one or more 
factory-built sections, which includes the plumbing, heating and 
electrical systems contained therein, which is built to comply with the 
Federal Manufactured Home Construction and Safety Standards (FMHCSS), 
and which is designed to be used with or without a permanent foundation. 
Specific requirements for manufactured homes sites, rental projects and 
subdivisions are in exhibit J of this subpart.
    (l) Mechanic's and materialmen's liens. A lien on real property in 
favor of persons supplying labor and/or materials for the construction 
for the value of labor and/or materials supplied by them. In some 
jurisdictions, a mechanic's lien also exists for the value of 
professional services.
    (m) Modular/panelized housing. Housing, constructed of one or more 
factory-built sections, which, when completed, meets or exceeds the 
requirements of one or more of the recognized development standards for 
site-built housing, and which is designed to be permanently connected to 
a site-built foundation.
    (n) Project representative. The architect's or owner's 
representative at the construction site who assists in the 
administration of the construction contract. When required by FmHA or 
its successor agency under Public Law 103-354, a full-time project 
representative shall be employed.
    (o) Technical services. Applicants are responsible for obtaining the 
services necessary to plan projects including analysis of project design 
requirements, creation and development of the project design, 
preparation of drawings, specifications and bidding requirements, and 
general administration of the construction contract.
    (1) Architectural services. The services of a professionally 
qualified person or organization, duly licensed and qualified in 
accordance with state law to perform architectural services.
    (2) Engineering services. The services of a professionally qualified 
person or organization, duly licensed and qualified in accordance with 
State law to perform engineering services.
    (p) Warranty. A legally enforceable assurance provided by the 
builder (warrantor) to the owner and the FmHA or its successor agency 
under Public Law 103-354 indicating that the work done and materials 
supplied conform to those specified in the contract documents and 
applicable regulations. For the period of the warranty, the warrantor 
agrees to repair defective workmanship and repair or replace any 
defective materials at the expense of the warrantor.

[52 FR 8002, Mar. 13, 1987, as amended at 59 FR 6882, Feb. 14, 1994]



Sec. 1924.5  Planning development work.

    (a) Extent of development. For an FO loan, the plans for development 
will include the items necessary to put the farm in a livable and 
operable condition consistent with the planned farm and home operations. 
For other types of loans, the plans will include those items essential 
to achieve the objectives of the loan or grant as specified in the 
applicable regulation.
    (b) Funds for development work. The total cash cost of all planned 
development will be shown on Form FmHA or its successor agency under 
Public Law 103-354 1924-1, ``Development Plan,'' except Form FmHA or its 
successor agency under Public Law 103-354 1924-1 may be omitted when: 
(1) All development is to be done by the contract method, (2) adequate 
cost estimates are included in the docket, and (3) the work, including 
all landscaping, repairs, and site development work, is completely 
described on the drawings, in the specifications, or in the contract 
documents. Sufficient funds to pay for the total cash

[[Page 86]]

cost of all planned development must be provided at or before loan 
closing. Funds to be provided may include loan proceeds, any cash to be 
furnished by the borrower, proceeds from cost sharing programs such as 
Agricultural Stabilization and Conservation Service (ASCS) and Great 
Plains programs or proceeds from the sale of property in accordance with 
paragraph (g) of this section.
    (c) Scheduling of development work. (1) All construction work 
included in the development plan for RH loans will be scheduled for 
completion as quickly as practicable and no later than 9 months from the 
date of loan closing, except for mutual self-help housing where work may 
be scheduled for completion within a period of 15 months.
    (2) Development for farm program loans will be scheduled for 
completion as quickly as practicable and no later than 15 months from 
the date of loan closing unless more time is needed to establish land 
developnent practices in the area.
    (d) Construction. (1) All new buildings to be constructed and all 
alterations and repairs to buildings will be planned to conform with 
good construction practices. The FmHA or its successor agency under 
Public Law 103-354 Manual of Acceptable Practices (MAP) Vol. 4930.1 
(available in any FmHA or its successor agency under Public Law 103-354 
office), provides suggestions and illustrative clarifications of design 
and construction methods which are generally satisfactory in most areas. 
All improvements to the property will conform to applicable laws, 
ordinances, codes, and regulations related to the safety and sanitation 
of buildings; standards referenced in Appendices C through F of HUD 
Handbook 4910.1, Minimum Property Standards for Housing; Thermal 
Performance Construction Standards contained in exhibit D of this 
subpart and, when required, to certain other development standards 
described below.
    (i) The development standard applicable to a proposal will be 
selected by the loan applicant or recipient of an RH Conditional 
Commitment in accordance with the following. The standard selected must:
    (A) Relate to the type(s) of building proposed.
    (B) Meet or exceed any applicable local or state laws, ordinances, 
codes and regulations.
    (C) Include all referenced codes and standards.
    (D) Exclude inapplicable administrative requirements.
    (E) Be the current edition(s) of either paragraph (d)(1)(i)(E)(1) or 
(2) of this section:
    (1) The development standard, consisting of building, plumbing, 
mechanical and electrical codes, adopted by FmHA or its successor agency 
under Public Law 103-354 for use in the state (identified in a State 
Supplement to this section) in which the development is proposed, in 
accordance with the following:
    (i) The adopted development standard shall include any building, 
plumbing, mechanical or electrical code adopted by the State, if 
determined by the State Director to be based on one of the model codes 
listed in exhibit E to this subpart, or, if not available,
    (ii) The adopted development standard shall include any building, 
plumbing, mechanical or electrical code adopted by the state, if 
determined by the Administrator to be acceptable, or, if not available,
    (iii) The adopted development standard shall include the model 
building, plumbing, mechanical or electrical code listed in exhibit E to 
this subpart that is determined by the State Director to be most 
prevalent and appropriate for the state.
    (2) Any of the model building, plumbing, mechanical and electrical 
codes listed in exhibit E to this subpart or the standards defined in 
Sec. 1924.4(h)(3) of this subpart.
    (ii) Guide 2, ``FmHA or its successor agency under Public Law 103-
354 Design Guide,'' of this subpart (available in any FmHA or its 
successor agency under Public Law 103-354 office), includes guidelines 
for the evaluation of the design features which are not fully addressed 
in the development standards.

[[Page 87]]

    (iii) In new housing, all design, materials and construction will 
meet or exceed the applicable development standard as provided in 
paragraph (d)(1)(i) of this section.
    (iv) For multi-family residential rehabilitation, as defined in 
exhibit K of this subpart, all substantial rehabilitation work on 
existing buildings will meet or exceed the applicable development 
standard. All moderate rehabilitation work should comply with Guide 3, 
``Quality and Performance Criteria for Moderate Rehabilitation,'' of 
this subpart (available in any FmHA or its successor agency under Public 
Law 103-354 office).
    (v) The design and construction of housing repairs made with FmHA or 
its successor agency under Public Law 103-354 loan or grant funds will, 
as near as possible, comply with the applicable development standard.
    (vi) Farm LH design and construction will comply with the following:
    (A) Family projects, where the length of occupancy will be:
    (1) Year-round, will meet or exceed the applicable development 
standard.
    (2) Less than 12 months, but more than 6 months, will be in 
substantial conformance with the applicable development standard and 
constructed to facilitate conversion to year-round occupancy standards.
    (3) Six months or less, may be less than the applicable development 
standard but should be constructed in accordance with exhibit I of this 
subpart.
    (B) Dormitory and other nonfamily type projects, where the length of 
occupancy will be:
    (1) More than 6 months, will be in substantial conformance with the 
applicable development standard and will at least meet or exceed the 
requirements of the Department of Labor, Bureau of Employment Security 
(29 CFR 1910.140).
    (2) Six months or less, will comply with 
Sec. 1924.5(d)(1)(vi)(A)(3).
    (vii) Farm service buildings should be designed and constructed for 
adaptation to the local area. In designing and locating farm service 
buildings, consideration will be given to practices recommended by 
agriculture colleges, the Extension Service (ES), Soil Conservation 
Service (SCS) and other reliable sources.
    (2) Drawings, specifications, and estimates will fully describe the 
work. Technical data, tests, or engineering evaluations may be required 
to support the design of the development. The ``Guide for Drawings and 
Specifications,'' exhibit C of this subpart, describes the drawings and 
specifications that are to be included in the application for building 
construction, and subpart C of part 1924 of this chapter describes the 
drawings that should be included for development of building sites. The 
specific development standard being used, if required under paragraph 
(d)(1) of this section will be identified on all drawings and 
specifications.
    (3) Materials acceptance shall be the same as described in paragraph 
X of exhibit B to this subpart.
    (4) Except as provided in paragraphs (d)(4)(i) through (iii) of this 
section, new building construction and additions shall be designed and 
constructed in accordance with the earthquake (seismic) requirements of 
the applicable Agency's development standard (building code). The 
analysis and design of structural systems and components shall be in 
accordance with applicable requirements of an acceptable model building 
code.
    (i) Agricultural buildings that are not intended for human 
habitation are exempt from these earthquake (seismic) requirements.
    (ii) Single family conventional light wood frame dwellings of two 
stories or 35 feet in height maximum shall be designed and constructed 
in accordance with the 1992 Council of American Building Officials 
(CABO) One and Two Family Dwelling Code or the latest edition.
    (iii) Single family housing of masonry design and townhouses of wood 
frame construction and additions financed (either directly or through a 
guarantee) under title V of the Housing Act of 1949 are recommended to 
be designed and constructed in accordance with the earthquake (seismic) 
requirements of one of the building codes that provides an equivalent 
level of safety to that contained in the latest edition

[[Page 88]]

of the National Earthquake Hazard Reduction Program's (NEHRP) 
Recommended Provisions for the Development of Seismic Regulations for 
New Building (NEHRP Provisions).
    (iv) Acknowledgment of compliance with the applicable seismic safety 
requirements for new construction will be contained in the certification 
of final plans and specification on the appropriate Agency Form.
    (e) Land development. (1) In planning land development, 
consideration will be given to practices, including energy conservation 
measures, recommended by agricultural colleges, ES, SCS or other 
reliable sources. All land and water development will conform to 
applicable laws, ordinances, zoning and other applicable regulations 
including those related to soil and water conservation and pollution 
abatement. The County Supervisor or District Director also will 
encourage the applicant to use any cost-sharing and planning assistance 
that may be available through agricultural conservation programs.
    (2) Site and subdivision planning and development must meet the 
requirements of subpart C of part 1924 of this chapter.
    (3) Plans and descriptive material will fully describe the work.
    (4) The site planning design, development, installation and set-up 
of manufactured home sites, rental projects and subdivisions shall meet 
the requirements of exhibit J of this subpart and subpart C of part 1924 
of this chapter.
    (i) Plans for land leveling, irrigation, or drainage should include 
a map of the area to be improved showing the existing conditions with 
respect to soil, topography, elevations, depth of topsoil, kind of 
subsoil, and natural drainage, together with the proposed land 
development.
    (ii) When land development consists of, or includes, the 
conservation and use of water for irrigation or domestic purposes, the 
information submitted to the County Supervisor will include a statement 
as to the source of the water supply, right to the use of the water, and 
the adequacy and quality of the supply.
    (f) Responsibilities for planning development. Planning construction 
and land development and obtaining technical services in connection with 
drawings, specifications and cost estimates are the sole responsibility 
of the applicant, with such assistance from the County Supervisor or 
District Director (whichever is the appropriate loan processing and 
servicing officer for the type of loan involved), as may be necessary to 
be sure that the development is properly planned in order to protect 
FmHA or its successor agency under Public Law 103-354's security.
    (1) Responsibility of the applicant. (i) The applicant will arrange 
for obtaining any required technical services from qualified 
technicians, tradespeople, and recognized plan services, and the 
applicant will furnish the FmHA or its successor agency under Public Law 
103-354 sufficient information to describe fully the planned development 
and the manner in which it will be accomplished.
    (ii) When items of construction or land development require drawings 
and specifications, they will be sufficiently complete to avoid any 
misunderstanding as to extent, kind, and quality of work to be 
performed. The applicant will provide FmHA or its successor agency under 
Public Law 103-354 with one copy of the drawings and specifications. 
Approval will be indicated by the applicant and acceptance for the 
purposes of the loan indicated by the County Supervisor or District 
Director on all sheets of the drawings and at the end of the 
specifications, and both instruments will be a part of the loan docket. 
After the loan is closed, the borrower will retain a conformed copy of 
the approved drawings and specifications, and provide another conformed 
copy to the contractor. Items not requiring drawings and specifications 
may be described in narrative form.
    (iii) FmHA or its successor agency under Public Law 103-354 will 
accept final drawings and specifications and any modifications thereof 
only after the documents have been certified in writing as being in 
conformance with the applicable development standard if required under 
paragraph (d)(1) of this section. Certification is required for all

[[Page 89]]

Single Family Housing (SFH) thermal designs (plans, specifications, and 
calculations).
    (A) Certifications may be accepted from individuals or organizations 
who are trained and experienced in the compliance, interpretation or 
enforcement of the applicable development standards for drawings and 
specifications. Plan certifiers may be any of the following:
    (1) Licensed architects,
    (2) Professional engineers,
    (3) Plan reviewers certified by a national model code organization 
listed in exhibit E to this subpart,
    (4) Local building officials authorized to review and approve 
building plans and specifications, or
    (5) National codes organizations listed in exhibit E to this 
subpart.
    (B) The license or authorization of the individual must be current 
at the time of the certification statement. A building permit (except as 
noted in paragraph (f)(1)(iii)(C)(2) of this section) or professional's 
stamp is not an acceptable substitute for the certification statement. 
However, a code compliance review conducted by one of the National 
recognized code organizations indicating no deficiencies or the noted 
deficiencies have been corrected is an acceptable substitute for the 
certification statement.
    (C) For Single Family Housing (one to four family dwelling units) 
FmHA or its successor agency under Public Law 103-354 may also accept 
drawings and specifications that have been certified by:
    (1) Registered Professional Building Designers certified by the 
American Institute of Building Design.
    (2) A local community, if that community has adopted, by reference, 
one of the model building codes and has trained official(s) who 
review(s) plans as well as inspect(s) construction for compliance as a 
requisite for issuing a building permit. The building permit, issued by 
the community, may serve as evidence of acceptance. The State Director 
will determine eligible communities and publish, as a State supplement 
to this section, a list of those communities that qualify.
    (3) A plan service that provides drawings and specifications that 
are certified by individuals or organizations as listed in paragraph 
(f)(1)(iii)(A) or (f)(1)(iii)(C) (1) and (2) of this section as meeting 
the appropriate state adopted development standard.
    (4) Builders/Contractors who provide 10-year warranty plans for the 
specific FmHA or its successor agency under Public Law 103-354 finance 
dwelling unit that meet the requirements of exhibit L of this subpart.
    (5) Builders/Contractors that are approved by the United States 
Department of Housing and Urban Development (HUD) for self-
certification.
    (D) The modifications of certified drawings or specifications must 
be certified by the same individual or organization that certified the 
original drawings and specifications. If such individual or organization 
is not available, the entire set of modified drawings and specifications 
must be recertified.
    (E) The certification of modifications for single family housing 
(SFH) construction may be waived if the builder or original author of 
the drawings and specifications provides a written statement that the 
modifications are not regulated by the applicable development standard. 
The County Supervisor may consult with the State Office Architect/
Engineer as to acceptance of the statement and granting a waiver.
    (F) All certifications of final drawings, specifications, and 
calculations shall be on Form FmHA or its successor agency under Public 
Law 103-354 1924-25, ``Plan Certification.''
    (2) Responsibility of the County Supervisor or District Director. In 
accordance with program regulations for loans and grants they are 
required to process, the County Supervisor or District Director, for the 
sole benefit of FmHA or its successor agency under Public Law 103-354, 
will:
    (i) Visit each farm or site on which the development is proposed. 
For an FO loan, the County Supervisor and the applicant will determine 
the items of development necessary to put the farm in a livable and 
operable condition at the outset. Prepare Form FmHA or its successor 
agency under Public Law 103-354 1924-1, when applicable in accordance 
with the Forms Manual Insert (FMI) for the form, after a complete 
understanding has been

[[Page 90]]

reached between the applicant and the County Supervisor regarding the 
development to be accomplished, including the dates each item of 
development will be started and completed.
    (ii) Notify the loan or grant applicant in writing immediately if, 
after reviewing the preliminary proposal and inspecting the site, the 
proposal is not acceptable. If the proposal is acceptable, an 
understanding will be reached with the applicant concerning the starting 
date for each item of development.
    (iii) Discuss with the applicant the FmHA or its successor agency 
under Public Law 103-354 requirements with respect to good construction 
and land development practices.
    (iv) Advise the applicant regarding drawings, specifications, cost 
estimates, and other related material which the applicant must submit to 
the FmHA or its successor agency under Public Law 103-354 for review 
before the loan can be developed. Advise the applicant of the 
information necessary in the drawings, how the cost estimates should be 
prepared, the number of sets of drawings, specifications, and cost 
estimates required, and the necessity for furnishing such information 
promptly. Advise the applicant that FmHA or its successor agency under 
Public Law 103-354 will provide appropriate specification forms, Form 
FmHA or its successor agency under Public Law 103-354 1924-2, 
``Description of Materials,'' and Form FmHA or its successor agency 
under Public Law 103-354 1924-3, ``Service Building Specifications.'' 
The applicant may, however, use other properly prepared specifications.
    (v) Advise the applicant regarding publications, plans, planning 
aids, engineering data, and other technical advice and assistance 
available through local, state, and Federal agencies, and private 
individuals and organizations.
    (vi) Review the information furnished by the applicant to determine 
the completeness of the plans, adequacy of the cost estimates, 
suitability and soundness of the proposed development.
    (vii) When appropriate, offer suggestions as to how drawings and 
specifications might be altered to improve the facility and better serve 
the needs of the applicant. The County Supervisor or District Director 
may assist the applicant in making revisions to the drawings. When 
appropriate, the contract documents will be forwarded to the State 
architect/engineer for review. For revisions requiring technical 
determinations that FmHA or its successor agency under Public Law 103-
354 is not able to make, the applicant will be requested to obtain 
additional technical assistance.
    (viii) Provide the applicant with a written list of changes required 
in the contract documents. The applicant will submit two complete 
revised (as requested) sets of contract documents, for approval. On one 
set, the County Supervisor or District Director will indicate acceptance 
on each sheet of the drawings, and on the cover of the specifications 
and all other contract documents. At least the date and the initials of 
the approval official must be shown. On projects where a consulting 
architect or engineer has been retained, this acceptance will be 
indicated only after the State Director has given written authorization. 
The marked set of documents shall be available at the job site at all 
times for review by FmHA or its successor agency under Public Law 103-
354. The second set will become part of the loan docket.
    (ix) Review the proposed method of doing the work and determine 
whether the work can be performed satisfactorily under the proposed 
method.
    (x) Instruct the applicant not to incur any debts prior to loan 
closing for materials or labor or make any expenditures for such 
purposes with the expectation of being reimbursed from loan funds.
    (xi) Instruct the applicant not to commence any construction nor 
cause any supplies or materials to be delivered to the construction site 
prior to loan closing.
    (xii) Under certain conditions prescribed in exhibit H of this 
subpart, provide the applicant with a copy of the leaflet, ``Warning--
Lead-Based Paint Hazards,'' which is attachment 1 of exhibit H 
(available in any FmHA or its successor agency under Public Law 103-354 
office), and the warning sheet, ``Caution Note on Lead-Based Paint

[[Page 91]]

Hazard,'' which is attachment 2 of exhibit H (available in any FmHA or 
its successor agency under Public Law 103-354 office).
    (g) Surplus structures and use or sale of timber, sand, or stone. In 
planning the development, the applicant and the County Supervisor or 
District Director should, when practicable, plan to use salvage from old 
buildings, timber, sand, gravel, or stone from the property. The 
borrower may sell surplus buildings, timber, sand, gravel, or stone that 
is not to be used in performing planned development and use net proceeds 
to pay costs of performing planned development work. In such a case:
    (1) An agreement will be recorded in the narrative of Form FmHA or 
its successor agency under Public Law 103-354 1924-1 which as a minimum 
will:
    (i) Identify the property to be sold, the estimated net proceeds to 
be received, and the approximate date by which the property will be 
sold.
    (ii) Provide that the borrower will deposit the net proceeds in the 
supervised bank account and apply any funds remaining after the 
development is complete as an extra payment on the loan, or in 
accordance with Sec. 1965.13(f) of subpart A of part 1965 of this 
chapter for farm program loans.
    (2) The agreement will be considered by the Government as modifying 
the mortgage contract to the extent of authorizing and requiring the 
Government to release the identified property subject to the conditions 
stated in the agreement without payment or other consideration at the 
time of release, regardless of whether or not the mortgage specifically 
refers to Form FmHA or its successor agency under Public Law 103-354 
1924-1 or the agreement to release.
    (3) If the FmHA or its successor agency under Public Law 103-354 
loan will be secured by a junior lien, all prior lienholders must give 
written consent to the proposed sale and the use of the net proceeds 
before the loan is approved.
    (4) Releases requested by the borrower or the buyer will be 
processed in accordance with applicable release procedures in subpart A 
or subpart C of part 1965 of this chapter, as appropriate.
    (h) Review prior to performing development work. For the sole 
benefit of FmHA or its successor agency under Public Law 103-354, prior 
to beginning development work, the County Supervisor or District 
Director will review planned development with the borrower. Adequacy of 
the drawings and specifications as well as the estimates will be checked 
to make sure the work can be completed within the time limits previously 
agreed upon and with available funds. Items and quantities of any 
materials the borrower has agreed to furnish will be checked and dates 
by which each item of development should be started will be checked in 
order that the work may be completed on schedule. If any changes in the 
plans and specifications are proposed, they should be within the general 
scope of the work as originally planned. Changes must be approved and 
processed in accordance with Sec. 1924.10 of this subpart. The 
appropriate procedure for performing development should be explained to 
the borrower. Copies of FmHA or its successor agency under Public Law 
103-354 forms that will be used during the period of construction should 
be given to the borrower. The borrower should be advised as to the 
purpose of each form and at what period during construction each form 
will be used.
    (i) Time of starting development work. Development work will be 
started as soon as feasible after the loan is closed. Except in cases in 
which advance commitments are made in accordance with subpart A of part 
1944 of this chapter or according to Sec. 1924.13(e)(1)(vi)(A) or 
Sec. 1924.13(e)(2)(ix)(A) of this subpart, no commitments with respect 
to performing planned development will be made by the County Supervisor, 
District Director, or the applicant before the loan is closed. The 
applicant will be instructed that before the loan is closed, debts 
should not be incurred for labor or materials, or expenditures made for 
such purposes, with the expectation of being reimbursed from loan funds 
except as provided in subpart A of part 1943 of this chapter and 
subparts A and E of part 1944 of this

[[Page 92]]

chapter. However, with the prior approval of the National Office, a 
State Supplement may be issued authorizing County Supervisors to permit 
applicants to commence welldrilling operations prior to loan closing, 
provided:
    (1) It is necessary in the area to provide the water supply prior to 
loan closing,
    (2) The applicant agrees in writing to pay with personal funds all 
costs incurred if a satisfactory water supply is not obtained,
    (3) Any contractors and suppliers understand and agree that loan 
funds may not be available to make the payment,
    (4) Such action will not result under applicable State law in the 
giving of priority to mechanics and materialmen's liens over the later 
recorded FmHA or its successor agency under Public Law 103-354 mortgage, 
and
    (5) FmHA or its successor agency under Public Law 103-354 does not 
guarantee that the cost will be paid.

[52 FR 8002, Mar. 13, 1987, as amended at 52 FR 19283, May 22, 1987; 52 
FR 48391, Dec. 22, 1987; 52 FR 48799, Dec. 28, 1987; 53 FR 43676, Oct. 
28, 1988; 59 FR 43723, Aug. 25, 1994; 61 FR 65156, Dec. 11, 1996]

    Effective Date Note: At 67 FR 78326, Dec. 24, 2002, Sec. 1924.5 was 
amended by revising paragraph (g)(4) and the second and third sentences 
of the introductory text of paragraph (i) effective January 23, 2003. 
For the convenience of the user the revised text is set forth as 
follows:

Sec. 1924.5  Planning development work.

                                * * * * *

    (g) * * *
    (4) Releases requested by the borrower or the buyer will be 
processed in accordance with applicable release procedures in 7 CFR part 
3550, as appropriate.

                                * * * * *

    (i) * * * Except in cases in which advance commitments are made in 
accordance with 7 CFR part 3550 or according to 
Sec. 1924.13(e)(1)(vi)(A) or Sec. 1924.13(e)(2)(ix)(A) of this subpart, 
no commitments with respect to performing planned development will be 
made by the Agency or the applicant before the loan is closed. The 
applicant will be instructed that before the loan is closed, debts 
should not be incurred for labor or materials, or expenditures made for 
such purposes, with the expectation of being reimbursed from funds 
except as provided in subpart A of part 1943 of this chapter, 7 CFR part 
3550, and subpart E of part 1944 of this chapter. * * *



Sec. 1924.6  Performing development work.

    All construction work will be performed by one, or a combination, of 
the following methods: Contract, borrower, mutual self-help, or owner-
builder. All development work must be performed by a person, firm or 
organization qualified to provide the service. Conditional commitment 
construction is covered under subpart A of part 1944 of this chapter.
    (a) Contract method. This method of development will be used for all 
major construction except in cases where it is clearly not possible to 
obtain a contract at a reasonable or competitive cost. Work under this 
method is performed in accordance with a written contract.
    (1) Forms used. Form FmHA or its successor agency under Public Law 
103-354 1924-6, ``Construction Contract,'' will be used for SFH 
construction. Other contract documents for more complex construction, 
acceptable to the loan approval official and containing the requirements 
of subpart E of part 1901 of this chapter, may be used provided they are 
customarily used in the area and protect the interest of the borrower 
and the Government with respect to compliance with items such as the 
drawings, specifications, payments for work, inspections, completion, 
nondiscrimination in construction work and acceptance of the work. If 
needed, the Office of the General Counsel (OGC) will be consulted. The 
United States (including FmHA or its successor agency under Public Law 
103-354) will not become a party to a construction contract or incur any 
liability under it.
    (2) Contract provisions. Contracts will have a listing of 
attachments and the provisions of the contract will include:
    (i) The contract sum.
    (ii) The dates for starting and completing the work.
    (iii) The amount of liquidated damages to be charged.
    (iv) The amount, method, and frequency of payment.

[[Page 93]]

    (v) Whether or not surety bonds will be provided.
    (vi) The requirement that changes or additions must have prior 
written approval of FmHA or its successor agency under Public Law 103-
354.
    (3) Surety requirements. (i) Unless an exception is granted in 
accordance with paragraph (a)(3)(iii) of this section or when interim 
financing will be used, surety that guarantees both payment and 
performance in the amount of the contract will be furnished when one or 
more of the following conditions exist:
    (A) The contract exceeds $100,000.
    (B) The loan approval official determines that a surety bond appears 
advisable to protect the borrower against default of the contractor.
    (C) The applicant requests a surety bond.
    (D) The contract provides for partial payments in excess of the 
amount of 60 percent of the value of the work in place.
    (E) The contract provides for partial payments for materials 
suitably stored on the site.
    (ii) If surety bonds are required the construction contract must 
indicate that the contractor will furnish properly executed surety bonds 
prior to the start of any work. Exhibits F and G of this subpart as 
revised by OGC if necessary to comply with local or state statutory 
requirements will be used as the forms of payment bond and performance 
bond to be provided. Unless noncorporate surety is provided, the surety 
bonds may only be obtained from a corporate bonding company listed on 
the current Department of the Treasury Circular 570 (published annually 
in the Federal Register), as holding a certificate of authority as an 
acceptable surety on Federal bonds and as legally doing business in the 
State where the land is located. Noncorporate sureties are not 
recommended and the State Director will be responsible for determining 
the acceptability of the individual or individuals proposed as sureties 
on the bonds. The State Director must determine that an individual or 
individuals proposed as sureties must have cash or other liquid assets 
easily convertible to cash in an amount at least equal to 25 percent 
more than the contract amount in order to be acceptable. The 
individual(s) will pledge such liquid assets in an amount equal to the 
contract amount. Fees charged for noncorporate sureties may not exceed 
fees charged by corporate sureties on bonds of equal amount and, in no 
case, may surety be provided by the applicant or any person or 
organization with an identity of interest in the applicant's operation. 
The United States (including FmHA or its successor agency under Public 
Law 103-354) will incur no liability related in any way to a performance 
or payment bond provided in connection with a construction contract. 
FmHA or its successor agency under Public Law 103-354 will be named as 
co-obligee in the performance and payment bonds unless prohibited by 
state law.
    (iii) When an experienced and reliable contractor cannot obtain 
payment and performance bonds meeting the surety requirements of 
paragraph (a)(3)(ii) of this section, the State Director may entertain a 
request from the applicant for an exception to the surety requirements. 
The applicant's request must specifically state why the proposed 
contractor is unable to obtain payment and performance bonds meeting the 
surety requirements, and why it is financially advantageous for the 
applicant to award the contract to the proposed contractor without the 
required bonds.

If the applicant's request is reasonable and justified, and if the 
proposed contractor is reliable and experienced in the construction of 
projects of similar size, design, scope, and complexity, the State 
Director may grant an exception to the surety requirements for loans or 
grants within the State Director's approval authority and accept one or 
a combination of the following:
    (A) An unconditional and irrevocable letter of credit issued by a 
lending institution which has been reviewed and approved by OGC. In such 
cases, the construction contract must indicate that the contractor will 
furnish a properly executed letter of credit from a lending institution 
acceptable to FmHA or its successor agency under Public Law 103-354 
prior to the start of any work. The letter of credit must remain in 
effect until the date of final acceptance of work by the owner and

[[Page 94]]

FmHA or its successor agency under Public Law 103-354. In addition, the 
letter of credit must stipulate that the lending institution, upon 
written notification by FmHA or its successor agency under Public Law 
103-354 of the contractor's failure to perform under the terms of the 
contract, will advance funds up to the amount of the contract (including 
all FmHA or its successor agency under Public Law 103-354 approved 
contract change orders) to satisfy all prior debts incurred by the 
contractor in performing the contract and all funds necessary to 
complete the work. Payments may be made to the contractor in accordance 
with paragraph (a)(12)(i)(C) of this section as if full surety bonds 
were being provided.
    (B) If a letter of credit satisfying the conditions of paragraph 
(a)(3)(iii)(A) of this section cannot be obtained, the State Director 
may accept a deposit in the amount of the contract, into an interest or 
non-interest bearing supervised bank account. In such cases, the 
construction contract must indicate that the contractor will furnish the 
required deposit prior to the start of any work and that the funds shall 
remain on deposit until final acceptance of work by the owner and FmHA 
or its successor agency under Public Law 103-354. Payments may be made 
to the contractor in accordance with paragraph (a)(12)(i)(C) of this 
section as if full surety bonds were being provided.
    (C) When the provisions of paragraph (a)(3)(iii) (A) or (B) of this 
section can be met except that a surety bond, a letter of credit, and/or 
deposits are not obtainable in full amount of the contract, the State 
Director may accept an amount less than the full amount of the contract 
provided all of the following conditions are met:
    (1) The contractor provides a surety bond, a letter of credit, or 
deposits in the greatest amount possible, and provides documentation 
indicating the reasons why amounts exceeding the proposed amount cannot 
be provided.
    (2) The applicant agrees to the amount of the surety bond, letter of 
credit, or deposits proposed, and the State Director determines that the 
applicant has the financial capability to withstand any financial loss 
due to default of the contractor.
    (3) In the opinion of the State Director, the proposed amount and 
the method of payment will provide adequate protection for the borrower 
and the Government against default of the contractor.
    (4) The contract provides for partial payments not to exceed 90 
percent of the value of the work in place for that portion of the total 
contract which is guaranteed by an acceptable surety bond, letter of 
credit, or deposits, and partial payments not to exceed 60 percent of 
the value of the work in place for that portion of the total contract 
which is not guaranteed by surety, letter of credit, or deposits.

    Example:

    Contractor has a surety bond which guarantees payment and 
performance in an amount of $150,000 which represents 75 percent of the 
total contract amount of $200,000. The contractor's first request for 
payment appears thus:

--Value of work in place is $10,000.
--Payment for work guaranteed by surety is 75 percent times $10,000 
times 90 percent is $6,750.
--Payment for work not guaranteed by surety is 25 percent times $10,000 
times 60 percent is $1,500.
--Authorized payment is $8,250.

    (Each partial payment shall reflect values for work guaranteed by 
surety, letter of credit, or deposits, and work not so guaranteed).

    (iv) In cases where the contractor does not obtain payment and 
performance bonds in accordance with the surety requirements of 
paragraph (a)(3)(ii) of this section, or where an exception to the 
surety requirements is granted by the State Director, the following 
steps will be taken to protect the borrower and the government against 
latent obligations or defects in connection with the construction:
    (A) The contractor will furnish a properly executed corporate latent 
defects bond or a maintenance bond in the amount of 10 percent of the 
construction contract; or
    (B) An unconditional and irrevocable letter of credit in the amount 
of 10 percent of the construction contract issued by a lending 
institution which has been reviewed and approved by OGC; or
    (C) A cash deposit into an interest or non-interest bearing 
supervised bank

[[Page 95]]

account in the amount of 10 percent of the construction contract;
    (D) The period of protection against latent obligations and/or 
defects shall be one year from the date of final acceptance of work by 
the owner and FmHA or its successor agency under Public Law 103-354;
    (E) Final payment shall not be rendered to the contractor until the 
provisions of paragraph (a)(3)(iv) (A), (B) or (C) of this section have 
been met;
    (F) The contract will contain a clause indicating that the 
contractor agrees to provide surety or guarantee acceptable to the owner 
and FmHA or its successor agency under Public Law 103-354 against latent 
obligations and/or defects in connection with the construction.
    (4) Equal opportunity. Section 1901.205 of subpart E of part 1901 of 
this chapter applies to all loans or grants involving construction 
contracts and subcontracts in excess of $10,000.
    (5) Labor standards provisions. The provisions of the Davis-Bacon 
and related acts, which are published by the Department of Labor (29 CFR 
parts 1, 3 and 5), will apply when the contract involves either LH grant 
assistance, or 9 or more units in a project being assisted under the HUD 
section 8 housing assistance payment program for new construction.
    (6) Historical and archaeological preservation. The provisions of 
subpart F of part 1901 of this chapter concerning the protection of 
historical and archaeological properties will apply to all construction 
financed, in whole or in part, by FmHA or its successor agency under 
Public Law 103-354 loans and grants. These provisions have special 
applicability to development in areas designated by NRCS as Resource 
Conservation and Development (RC&D) areas. (See part 1942, subpart I of 
this chapter.)
    (7) Air and water acts. Under Executive Order 11738, all loans or 
grants involving construction contracts for more than $100,000 must meet 
all the requirements of section 114 of the Clean Air Act (42 U.S.C. 
7414) and section 308 of the Water Pollution Control Act (33 U.S.C., 
section 1813). The contract should contain provisions obligating the 
contractor as a condition for the award of the contract as follows:
    (i) To notify the owner of the receipt of any communication from 
Environmental Protection Agency (EPA) indicating that a facility to be 
utilized in the performance of the contract is under consideration to be 
listed on the EPA list of Violating Facilities. Prompt notification is 
required prior to contract award.
    (ii) To certify that any facility to be utilized in the performance 
of any nonexempt contractor subcontract is not listed on the EPA list of 
Violating Facilities as of the date of contract award.
    (iii) To include or cause to be included the above criteria and 
requirements of paragraphs (a)(7) (i) and (ii) of this section in every 
nonexempt subcontract, and that the contractor will take such action as 
the Government may direct as a means of enforcing such provisions.
    (8) Architectural barriers. In accordance with the Architectural 
Barriers Act of 1968 (Pub. L. 90-480), as implemented by the General 
Services Administration regulations (41 CFR 101- 19.6) and section 504 
of the Rehabilitation Act of 1973 (Pub. L. 93-112) as implemented by 7 
CFR, parts 15 and 15b, all facilities financed with FmHA or its 
successor agency under Public Law 103-354 loans and grants and which are 
accessible to the public or in which people with disabilities may be 
employed or reside must be developed in compliance with this Act. Copies 
of the Act and Federal accessibility design standards may be obtained 
from the Executive Director, Architectural and Transportation Barriers 
Compliance Board, Washington, DC 20201.
    (9) National Environmental Policy Act. The provisions of subpart G 
of part 1940 of this chapter concerning environmental requirements will 
apply to all loans and grants including those being assisted under the 
HUD section 8 housing assistance payment program for new construction.
    (10) Obtaining bids and selecting a contractor. (i) The applicant 
may select a contractor and negotiate a contract or

[[Page 96]]

contact several contractors and request each to submit a bid. For 
complex construction projects, refer also to Sec. 1924.13(e) of this 
subpart.
    (ii) When a price has already been negotiated by an applicant and a 
contractor, the County Supervisor, District Director or other 
appropriate FmHA or its successor agency under Public Law 103-354 
official will review the proposed contract. If the contractor is 
qualified to perform the development and provide a warranty of the work 
and the price compares favorably with the cost of similar construction 
in the area, further negotiation is unnecessary. If the FmHA or its 
successor agency under Public Law 103-354 official determines the price 
is too high or otherwise unreasonable, the applicant will be requested 
to negotiate further with the contractor. If a reasonable price cannot 
be negotiated or if the contractor is not qualified, the applicant will 
be requested to obtain competitive bids.
    (iii) When an applicant has a proposed development plan and no 
contractor in mind, competitive bidding will be encouraged. The 
applicant should obtain bids from as many qualified contractors, dealers 
or tradespeople as feasible depending on the method and type of 
construction.
    (iv) If the award of the contract is by competitive bidding, Form 
FmHA or its successor agency under Public Law 103-354 1924-5, 
``Invitation for Bid (Construction Contract),'' or another similar 
invitation bid form containing the requirements of subpart E of part 
1901 of this chapter, may be used. All contractors from whom bids are 
requested should be informed of all conditions of the contract including 
the time and place of opening bids. Conditions shall not be established 
which would give preference to a specific bidder or type of bidder. When 
applicable, copies of Forms FmHA or its successor agency under Public 
Law 103-354 1924-6 and FmHA or its successor agency under Public Law 
103-354 400-6, ``Compliance Statement,'' also should be provided to the 
prospective bidders.
    (11) Awarding the contract. The borrower, with the assistance of the 
County Supervisor or District Director, will consider the amount of the 
bids or proposals, and all conditions which were listed in the 
``Invitation for Bid.'' On the basis of these considerations, the 
borrower will select and notify the lowest responsible bidder.
    (i) Before work commences, the County Supervisor, District Director 
or other FmHA or its successor agency under Public Law 103-354 employee 
having knowledge of contracts and construction practices will hold a 
preconstruction conference with the borrower(s), contractor and 
architect/engineer (if applicable). The purpose of the conference is to 
reach a mutual understanding of each party's responsibilities under the 
terms and conditions of the contract documents and the loan agreement 
during the construction and warranty periods. Form FmHA or its successor 
agency under Public Law 103-354 1924-16, ``Record of Preconstruction 
Conference,'' may be used as a guide for an agenda.
    (ii) A summary of the items covered will be entered in the running 
case record.
    (iii) The contract will then be prepared, signed and copies 
distributed in accordance with the FMI for Form FmHA or its successor 
agency under Public Law 103-354 1924-6.
    (iv) After a borrower/contractor's contract or subcontract in excess 
of $10,000 is received in the FmHA or its successor agency under Public 
Law 103-354 County or District Office, the responsible FmHA or its 
successor agency under Public Law 103-354 official will send within 10 
calendar days of the date of the contract or subcontract, a report 
similar in form and content to exhibit C of subpart E of part 1901 of 
this chapter to the Area Director, Office of Federal Contract Compliance 
Programs, U.S. Department of Labor, at the applicable address listed in 
exhibit E, subpart E of part 1901 of this chapter. The report must 
contain, at least, the following information: contractor's name, address 
and telephone number; employer's identification number; amount, starting 
date and planned completion date of the contract; contract number; and 
city and DOL region of the contract site. The information for this 
report should be obtained from the contractor when the contract is 
awarded.

[[Page 97]]

    (12) Payments for work done by the contract method. (i) Payments 
will be made in accordance with one of the following methods unless 
prohibited by state statute, in which case the State Director shall 
issue a State Supplement to this section:
    (A) The ``One-Lump-Sum'' payment method will be used when the 
payment will be made in one lump-sum for the whole contract.
    (B) The ``Partial payments not to exceed 60 percent of the value of 
the work in place'' payment method will be used when the contractor does 
not provide surety bond, a letter of credit, or deposits.
    (C) The ``Partial payments in the amount of 90 percent of the value 
of the work in place and of the value of the materials suitably stored 
at the site'' payment method will be used when the contractor provides a 
surety bond equal to the total contract amount.
    (D) The ``Partial payments which reflect the portions of the 
contract amount which is guaranteed'' method will be used when the 
contractor provides surety bonds, a letter of credit, or deposits less 
than the total amount of the contract in accordance with the provisions 
of paragraph (a)(3)(iii)(C) of this section.
    (ii) When Form FmHA or its successor agency under Public Law 103-354 
1924-6 is used, the appropriate payment clause will be checked and the 
other payment clauses not used will be effectively crossed out.
    (iii) When a contract form other than Form FmHA or its successor 
agency under Public Law 103-354 1924-6 is used, the payment clause must 
conform with paragraph (a)(12)(i) of this section and the appropriate 
clause as set forth in Form FmHA or its successor agency under Public 
Law 103-354 1924-6.
    (iv) The borrower and FmHA or its successor agency under Public Law 
103-354 must take precautionary measures to see that all payments made 
to the contractor are properly applied against bills for materials and 
labor procured under the contract. Prior to making any partial payment 
on any contract where a surety bond is not used, the contractor will be 
required to furnish the borrower and the FmHA or its successor agency 
under Public Law 103-354 with a statement showing the total amount owed 
to date for materials and labor procured under the contract. The 
contractor also may be required to submit evidence showing that previous 
partial payments were applied properly. When the borrower and the County 
Supervisor or District Director have reason to believe that partial 
payments may not be applied properly, checks may be made jointly to the 
contractor and persons who furnished materials and labor in connection 
with the contract.
    (v) When partial payments are requested by the contractor and 
approved by the owner, the amount of the partial payment will be 
determined by one of the following methods:
    (A) Based upon the percentage completed as shown on a recently 
completed and properly executed Form FmHA or its successor agency under 
Public Law 103-354 1924-12, ``Inspection Report.''
    (B) When the structure will be covered by an insured 10-year 
warranty, the insurer's construction inspector must provide FmHA or its 
successor agency under Public Law 103-354 with any available copies of 
inspection reports showing percentage of completion immediately after 
the inspections are completed. To make partial payments when copies of 
inspection reports are not available, the responsible FmHA or its 
successor agency under Public Law 103-354 official will make the 
inspections or will be guided by the provisions of 
Sec. 1924.6(a)(12)(v)(C) of this subpart. If further assurance is deemed 
necessary to justify partial payments, the FmHA or its successor agency 
under Public Law 103-354 official may make onsite inspections or require 
additional information.
    (C) Based upon an application for payment containing an estimate of 
the value of work in place which has been prepared by the contractor and 
accepted by the borrower and FmHA or its successor agency under Public 
Law 103-354. When the contract provides for partial payments for 
materials satisfactorily stored at the site, the application for payment 
may include these items. Prior to receiving the first partial payment, 
the contractor should be

[[Page 98]]

required to submit a list of major subcontractors and suppliers and a 
schedule of prices or values of the various phases of the work 
aggregating the total sum of the contract such as excavation, 
foundations, framing, roofing, siding, mill work, painting, plumbing, 
heating, electric wiring, etc., made out in such form as agreed upon by 
the borrower, FmHA or its successor agency under Public Law 103-354, and 
the contractor. In applying for payments, the contractor should submit a 
statement based upon this schedule. See exhibit A of this subpart for 
guidance in reviewing the contractor's schedule of prices and estimating 
the value of the work in place.
    (vi) Final payment. (A) When the structure will be covered by an 
insured 10-year warranty, the insurer must provide an insured 10-year 
warranty policy (or a binder if the policy is not available) before 
final payment is made to the builder.
    (B) Final payment of the amount due on the contract or disbursal of 
the FmHA or its successor agency under Public Law 103-354 loan funds 
where an interim loan was used will be made only upon completion of the 
entire contract, final inspection by FmHA or its successor agency under 
Public Law 103-354, acceptance of the work by FmHA or its successor 
agency under Public Law 103-354 and the borrower, issuance of any and 
all final permits and approvals for the use and occupancy of the 
structure by any applicable state and local governmental authorities, 
and compliance by the contractor with all terms and conditions of the 
contract. In the event the work of construction is delayed or 
interrupted by reason of fire, flood unusually stormy weather, war, 
riot, strike, an order, requisition or regulation of any governmental 
body (excluding delays related to possible defects in the contractor's 
performance and excluding delays caused by the necessity of securing 
building permits or any required inspection procedures connected 
therewith) or other contingencies reasonably unforeseeable and beyond 
the reasonable control of the contractor, then with the written consent 
of FmHA or its successor agency under Public Law 103-354, the date of 
completion of the work may be extended by the owner by the period of 
such delay, provided that the contractor shall give the owner and FmHA 
or its successor agency under Public Law 103-354 written notice within 
72 hours of the occurrence of the event causing the delay or 
interruption.
    (C) Prior to making final payment on the contract when a surety bond 
is not used or disbursing the FmHA or its successor agency under Public 
Law 103-354 loan funds when an interim loan was used, FmHA or its 
successor agency under Public Law 103-354 will be provided with a Form 
FmHA or its successor agency under Public Law 103-354 1924-9, 
``Certificate of Contractor's Release,'' and Form FmHA or its successor 
agency under Public Law 103-354 1924-10, ``Release by Claimants.'' 
executed by all persons who furnished materials or labor in connection 
with the contract. The borrower should furnish the contractor with a 
copy of the ``Release by Claimants'' form at the beginning of the work 
in order that the contractor may obtain these releases as the work 
progresses.
    (1) If such releases cannot be obtained, the funds may be disbursed 
provided all the following can be met:
    (i) Release statements to the extent possible are obtained;
    (ii) The interests of FmHA or its successor agency under Public Law 
103-354 can be adequately protected and its security position is not 
impaired; and
    (iii) Adequate provisions are made for handling the unpaid account 
by withholding or escrowing sufficient funds to pay any such claims or 
obtaining a release bond.
    (2) The State Director may issue a State Supplement which will:
    (i) Not require the use of Form FmHA or its successor agency under 
Public Law 103-354 1924-10, if, under existing state statutes, the 
furnishing of labor and materials gives no right to a lien against the 
property, or
    (ii) Provide an alternative method to protect against mechanic's and 
materialmen's liens. In this case, the use of Form FmHA or its successor 
agency under Public Law 103-354 1924-10 is optional.
    (b) Borrower method. The borrower method means performance of work 
by or under the direction of the borrower,

[[Page 99]]

using one or more of the ways specified in this paragraph. Development 
work may be performed by the borrower method only when it is not 
practicable to do the work by the contract method; the borrower 
possesses or arranges through an approved self-help plan for the 
necessary skill and managerial ability to complete the work 
satisfactorily; such work not interfere seriously with the borrower's 
farming operation or work schedule, and the County Office caseload will 
permit a County Supervisor to properly advise the borrower and inspect 
the work.
    (1) Ways of performing the work. The borrower will:
    (i) Purchase the material and equipment and do the work.
    (ii) Utilize lump-sum agreements for (A) minor items or minor 
portions of items of development, the total cost of which does not 
exceed $5,000 per agreement, such as labor, material, or labor and 
material for small service buildings, repair jobs, or land development; 
or (B) material and equipment which involve a single trade and will be 
installed by the seller, such as the purchase and installation of 
heating facilities, electric wiring, wells, painting, liming, or 
sodding. All agreements will be in writing, however, the County 
Supervisor may make an exception to this requirement when the agreement 
involves a relatively small amount.
    (2) Acceptance and storage of material on site. The County 
Supervisor will advise the borrower that the acceptance of material as 
delivered to the site and the proper storage of material will be the 
borrower's responsibility.
    (3) Payment for work done by the borrower method--(i) Payments for 
labor. Before the County Supervisor countersigns checks for labor, the 
borrower must submit a completed Form FmHA or its successor agency under 
Public Law 103-354 1924-11, ``Statement of Labor Performed,'' for each 
hired worker performing labor during the pay period. Ordinarily, checks 
for labor will be made payable to the workers involved. However, under 
justifiable circumstances, when the borrower has paid for labor with 
personal funds and has obtained signatures of the workers on Form FmHA 
or its successor agency under Public Law 103-354 1924-11 as having 
received payment, the County Supervisor may countersign a check made 
payable to the borrower for reimbursement of these expenditures. Under 
no circumstances will the County Supervisor permit loan funds or funds 
withdrawn from the supervised bank account to be used to pay the 
borrower for the borrower's own labor or labor performed by any member 
of the borrower's household.
    (ii) Payment for equipment, materials or lump-sum agreements. (A) 
Before countersigning checks for equipment or materials, the County 
Supervisor must normally have an invoice from the seller covering the 
equipment or materials to be purchased. When an invoice is not available 
at the time the check is issued, an itemized statement of the equipment 
or materials to be purchased may be substituted until a paid invoice 
from the seller is submitted, at which time the prepurchase statement 
may be destroyed.
    (B) When an invoice is available at the time the check is drawn, the 
check will include a reference to the invoice number, the invoice date 
if unnumbered and, if necessary, the purpose of the expenditure.
    (C) The check number and date of payment will be indicated on the 
appropriate Form FmHA or its successor agency under Public Law 103-354 
1924-11, invoice, itemized statement of equipment or materials and/or 
lump-sum agreement.
    (D) Ordinarily, checks for equipment or materials will be made 
payable to the seller. Under justifiable circumstances, when the 
borrower has paid for equipment or materials with personal funds and 
furnished a paid invoice, the County Supervisor may countersign a check 
made payable to the borrower for reimbursement of these expenses.
    (E) When an invoice includes equipment or materials for more than 
one item of development, the appropriate part of the cost to be charged 
against each item of development will be indicated on the invoice by the 
borrower, with the assistance of the County Supervisor.
    (F) Payment made under lump-sum agreements will be made only when 
all items of equipment and materials have

[[Page 100]]

been furnished, labor has been performed as agreed upon, and the work 
has been accepted by the borrower and FmHA or its successor agency under 
Public Law 103-354.
    (G) Each paid Form FmHA or its successor agency under Public Law 
103-354 1924-11, invoice, itemized statement for equipment or material 
and/or lump-sum agreement will be given to the borrower in accordance 
with the FMI.
    (c) Mutual self-help method. The mutual self-help method is 
performance of work by a group of families by mutual labor under the 
direction of a construction supervisor, as described in subpart A of 
part 1944 of this chapter. The ways of doing the work, buying materials, 
and contracting for special services are like those used for the 
borrower method. Materials can be bought jointly by the group of 
families, but payments will be made individually by each family. In the 
case of RH loans to families being assisted by Self-Help Technical 
Assistance (TA) grants in accordance with subpart I of part 1944 of this 
chapter, the County Supervisor may countersign checks for materials and 
necessary contract work made payable directly to the TA grantee, 
provided the District Director determines that:
    (1) The grantee acts in the same capacity as a construction manager 
in the group purchase of material and services.
    (2) The grantee has an adequate bookkeeping system approved by the 
District Director to assure that funds in each RH account are properly 
distributed and maintained.
    (3) The grantee receives no compensation in the way of profit or 
overhead for this service and all discounts and rebates received in 
connection with the purchase of materials or services are passed on to 
the participating families.
    (4) The grantee has a record-keeping system which shows that the 
costs of the materials and services were prorated to each borrower's 
account in relation to the actual material and service used by each 
borrower.
    (d) Owner-builder method. This method of construction applies only 
to RRH loans made under subpart E of part 1944 of this chapter. 
Regulations governing this method are found at Sec. 1924.13(e)(2) of 
this subpart.

[52 FR 8002, Mar. 13, 1987, as amended at 55 FR 41833, Oct. 16, 1990; 60 
FR 55122, Oct. 27, 1995; 61 FR 56116, Oct. 31, 1996]

    Effective Date Note: At 67 FR 78326, Dec. 24, 2002, Sec. 1924.6 was 
amended by revising the last sentence in the introductory text and the 
first sentence in paragraph (c) effective January 23, 2003. For the 
convenience of the user the revised text is set forth as follows:

Sec. 1924.6  Performing development work.

    * * * Conditional commitment construction is covered under 7 CFR 
part 3550.

                                * * * * *

    (c) * * * The mutual self-help method is performance of work by a 
group of families by mutual labor under the direction of a construction 
supervisor, as described in 7 CFR part 3550. * * *

                                * * * * *



Sec. 1924.7  [Reserved]



Sec. 1924.8  Development work for modular/panelized housing units.

    (a) Exhibit B of this subpart applies to all loans involving 
modular/panelized housing units.
    (b) Complete drawings and specifications will be required as 
prescribed in exhibit C of this subpart. Each set of drawings will 
contain the design of the foundation system required for the soil and 
slope conditions of the particular site on which the modular/panelized 
house is to be placed.
    (c) The manufacturer will provide a certification (exhibit B, 
attachment 5 of this subpart), stating that the building has been built 
substantially in accordance with the drawings and specifications. The 
builder will also provide a certification that the onsite work complies 
with drawings, specifications, and the applicable development standard 
(eExhibit B, attachment 5 of this subpart).
    (d) Responsibility for field inspections will be in accordance with 
Sec. 1924.9(a) of this subpart. Frequency and timing of inspections will 
be in accordance with Sec. 1924.9(b) of this subpart, except that the 
Stage 2 inspection should be made during the time and in no case later 
than two working days after the crews commence work on the

[[Page 101]]

site and the house is being erected or placed on the foundation, to 
determine compliance with the accepted drawings and specifications.
    (e) Periodic plant inspections will be performed in accordance with 
paragraphs II and III of exhibit B of this subpart. FmHA or its 
successor agency under Public Law 103-354 employees responsible for 
inspections in the area in which the manufacturing plant or material 
supply yard is located will perform such inspections as deemed necessary 
under paragraph III of exhibit B of this subpart.
    (1) Plant inspections will be made if the type construction method 
used could restrict adequate inspections on the building site.
    (2) Plant inspections will be made as often as necessary; however, 
after initial inspection and acceptance of the unit, only when it 
appears advisable to ascertain the performance and continuing stability 
of accepted materials and construction.
    (f) Only one contract will be accepted for the completed house on 
the site owned or to be bought by the borrower. The manufacturer of the 
house or the manufacturer's agent may be the prime contractor for 
delivery and erection of the house on the site or a builder may contract 
with the borrower for the complete house in place on the site. Such 
contracts should provide that payments will be made only for work in 
place on the borrower's site.
    (g) Payments for modular/panelized units will be made in accordance 
with the terms of the contract and in compliance with Sec. 1924.6(a)(12) 
of this subpart.



Sec. 1924.9  Inspection of development work.

    The following policies will govern the inspection of all development 
work.
    (a) Responsibility for inspection. The County Supervisor or District 
Director, accompanied by the borrower when practicable, will make final 
inspection of all development work and periodic inspections as 
appropriate to protect the security interest of the government. In this 
respect, inspections other than final inspections, may be conducted by 
other qualified persons as authorized in paragraph (b)(3) of this 
section, in Sec. 1944.17(a)(2)(iii) of FmHA Instruction 2024-A 
(available in any RECD field office), and as authorized under other 
agreements executed by, or authorized by, the National Office.

The borrower will be responsible for making inspections necessary to 
protect the borrower's interest. RHS or its successor agency under 
Public Law 103-354 inspections are not to assure the borrower that the 
house is built in accordance with the plans and specifications. The 
inspections create or imply no duty or obligation to the particular 
borrower. RHS or its successor agency under Public Law 103-354 
inspections are for the dual purpose of determining that RHS or its 
successor agency under Public Law 103-354 has adequate security for its 
loan and is achieving the statutory goal of providing adequate housing. 
If difficult technical problems are encountered, the County Supervisor 
or District Director should request the assistance of the State Office 
or a qualified technician from SCS or the State University Cooperative 
Extension Service.
    (b) Frequency of inspections. The County Supervisor or District 
Director will inspect development work as frequently as necessary to 
assure that construction and land development conforms to the drawings 
and specifications. The final inspection will be made at the earliest 
possible date after completion of the planned development. When several 
major items of development are involved, final inspection will be made 
upon completion of each item.
    (1) For new buildings and additions to existing buildings, 
inspections will be made at the following stages of construction and at 
such other stages of construction as determined by the County Supervisor 
or District Director except as modified by paragraph (b)(3) of this 
section.
    (i) Stage 1. Customarily, the initial inspection in construction 
cases is made just prior to or during the placement of concrete footings 
or monolithic footings and floor slabs. At this point, foundation 
excavations are complete, forms or trenches and steel are ready for 
concrete placement and the subsurface installation is roughed in. 
However, when it is not practicable to make the initial inspection prior 
to or

[[Page 102]]

during the placement of concrete, the County Supervisor or District 
Director will make the initial inspection as soon as possible after the 
placement of concrete and before any backfill is in place.
    (ii) Stage 2. The Stage 2 inspection will be made when the building 
is enclosed, structural members are still exposed, roughing in for 
heating, plumbing, and electrical work is in place and visible, and wall 
insulation and vapor barriers are installed. Customarily, this is prior 
to installation of brick veneer or any interior finish which would 
include lath, wallboard and finish flooring.
    (iii) Stage 3. The final inspection will be made when all on-site 
and off-site development has been completed and the structure is ready 
for occupancy or its intended use.
    (2) For rehabilitation of existing buildings, inspections will be 
made in accordance with paragraphs (b)(1) (ii) and (iii) of this 
section, and at such other stages of construction to assure that 
construction is being performed in a professional manner and in 
accordance with the FmHA or its successor agency under Public Law 103-
354 approved drawings and specifications.
    (3) For new construction when the structure will be covered by an 
insured 10-year warranty plan as described in exhibit L of this subpart, 
only the final inspection is required, except in cases when partial 
payments are required when the provisions of Sec. 1924.6(a)(12)(v) of 
this subpart will be followed.
    (4) Arrangements should be made to have the borrower join the County 
Supervisor or the District Director in making periodic inspections as 
often as necessary to provide a mutual understanding with regard to the 
progress and performance of the work.
    (5) The Borrower should make enough periodic visits to the site to 
be familiar with the progress and performance of the work, in order to 
protect the borrower's interest. If the borrower observes or otherwise 
becomes aware of any fault or defect in the work or nonconformance with 
the contract documents, the borrower should give prompt written notice 
thereof to the contractor with a copy to the County Supervisor or 
District Director responsible for servicing the type of loan or grant 
involved.
    (6) The borrower should, when practicable, join the County 
Supervisor or District Director in making all final inspections.
    (7) When irrigation equipment and materials are to be purchased and 
installed, a performance test under actual operating conditions by the 
person or firm making the installation should be required before final 
acceptance is made. The test should be conducted in the presence of the 
borrower, a qualified technician, and, when practicable, the County 
Supervisor or District Director. If the FmHA or its successor agency 
under Public Law 103-354 official is not present at the performance 
test, he or she should request the technician to furnish a report as to 
whether or not the installation meets the requirements of the plans and 
specifications.
    (8) For irrigation and drainage construction or any dwelling 
construction where part or all of the work will be buried or backfilled, 
interim inspections should be made at such stages of construction that 
compliance with plans and specifications can be determined.
    (c) Recording inspections and correction of deficiencies. All 
periodic and final inspections made by the County Supervisor or District 
Director will be recorded on Form FmHA or its successor agency under 
Public Law 103-354 1924-12 in accordance with the FMI. The County 
Supervisor or District Director will be responsible for following up on 
the correction of deficiencies reported on Form FmHA or its successor 
agency under Public Law 103-354 1924-12. When an architect/engineer is 
providing services on a project, the District Director should notify the 
architect/engineer immediately of any fault or defect observed in the 
work or of any nonconformance with the contract document. If the 
borrower or the contractor refuses to correct the deficiencies, the 
District Director will report the facts to the State Director who will 
determine the action to be taken. No inspection will be recorded as a 
final inspection until all deficiencies or nonconforming conditions have 
been corrected.

[[Page 103]]

    (d) Acceptance by responsible public authority. When local (city) 
county, state, or other public authority) codes and ordinances require 
inspections, final acceptance by the local authority having jurisdiction 
will be required prior to final inspection or acceptance by FmHA or its 
successor agency under Public Law 103-354.
    (e) Acceptance by project architect. If architectural services 
pursuant to Sec. 1924.13(a) of this subpart have been obtained, final 
acceptance by the project architect pursuant to Sec. 1924.13(a)(5)(v) of 
this subpart will be required prior to acceptance by FmHA or its 
successor agency under Public Law 103-354.

[52 FR 8002, Mar. 13, 1987, as amended at 60 FR 55122, Oct. 27, 1995; 61 
FR 2899, Jan. 30, 1996]

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1924.9 was 
amended in the second sentence of paragraph (a) by revising the words 
``in paragraph (b)(3) of this section, in Sec. 1944.17(a)(2)(iii) of 
FmHA Instruction 2024-A (available in any RECD field office)'' to read 
``in paragraph (d) of this section, in 7 CFR part 3550, in RD 
Instruction 2024-A (available in any Rural Development office)'' 
effective January 23, 2003.



Sec. 1924.10  Making changes in the planned development.

    The borrower may request changes in the planned development in 
accordance with this section.
    (a) Authority of the County Supervisor. The County Supervisor is 
authorized to approve changes in the planned development involving loans 
and grants within the County Supervisor's approval authority provided:
    (1) The change is for an authorized purpose and within the scope of 
the original proposal.
    (2) Sufficient funds are deposited in the borrower's supervised bank 
account or with the interim lender, as appropriate, to cover the 
contemplated changes when the change involves additional funds to be 
furnished by the borrower.
    (3) The change will not adversely affect the soundness of the 
operation or FmHA or its successor agency under Public Law 103-354's 
security. If uncertain as to the probable effect the change would have 
on the soundness of the operation or FmHA or its successor agency under 
Public Law 103-354 security, the County Supervisor will obtain advice 
from the District Director on whether to approve the change.
    (4) If a surety bond has been provided on the full amount of the 
construction contract, the aggregate amount of all contract change 
orders on Form FmHA or its successor agency under Public Law 103-354 
1924-7, ``Contract Change Order,'' or other acceptable form will not 
exceed 20 percent of the original contract amount. Change orders for 
contracts on which a surety bond has been provided which increases the 
original contract amount by more than 20 percent may only be approved if 
additional surety is provided in the full revised amount of the 
contract. For purposes of this paragraph, letters of credit and deposits 
are not considered surety.
    (5) Change orders for contracts on which letters of credit or 
deposits have been provided on the full amount of the contract which 
will increase the original contract amount are approved only if 
additional letters of credit or deposits are provided in the full 
revised amount of the contract.
    (6) Modifications have been certified in accordance with 
Sec. 1924.5(f)(1)(iii) or certification has been waived in accordance 
with Sec. 1924.5(f)(1)(iii)(C) of this subpart.
    (b) Authority of the District Director. The District Director is 
authorized to approve changes in the development planned with RRH, RCH, 
and RHS loans and LH loans and grants within the District Director's 
approval authority, provided the conditions in Sec. 1924.10(a) have been 
met. For such loans in excess of the District Director's approval 
authority, the borrower's request with the District Director's 
recommendation will be forwarded to the State Director for 
consideration.
    (c) Recording changes in the planned development. (1) Changes should 
be accomplished only after FmHA or its successor agency under Public Law 
103-354 written approval. Changes will not be included in payment 
requests until approved by the borrower; the contractor, if applicable; 
the architect/engineer, if applicable; and the FmHA or its successor 
agency under Public Law 103-354

[[Page 104]]

loan approval official. Examples of changes requiring documentation are:
    (i) Any changes in labor and materials and their respective costs.
    (ii) Changes in facility design.
    (iii) Any decrease or increase in unit-price on final measurements 
that are different from those shown in the bidding schedule.
    (iv) Any increase or decrease in the time to complete the project.
    (2) All changes shall be recorded in chronological order as follows:
    (i) Contract method. Changes shall be numbered in sequence as they 
occur using Form FmHA or its successor agency under Public Law 103-354 
1924-7 with necessary attachments.
    (ii) Borrower method. An increase or decrease in the cash cost, 
extension of time, transfer of funds between items, or an addition or 
deletion of items of development, will be summarized on the front of 
Form FmHA or its successor agency under Public Law 103-354 1924-1 by 
striking through the original figures on items and writing in the 
changes. Changes made in the ``Development Plan'' in the working 
drawings, or in the plans and specifications will be dated and initialed 
by all parties.
    (iii) Mutual self-help method. [See paragraph (c)(2)(ii) of this 
section.]
    (iv) Owner-builder method. [See paragraph (c)(2)(i) of this 
section.]
    (3) All changes in facility design and/or materials must be 
certified in accordance with Sec. 1924.5(f)(1)(iii) of this subpart.



Sec. 1924.11  District Director's review of incomplete development.

    During monthly District Office work organization meetings and during 
regular visits to the County Office, the District Director will review 
the progress that is being made in completing development financed with 
loans within the District Director's and County Supervisor's 
responsibility.
    (a) Once each year the District Director will make a comprehensive 
review of all development work not completed within the time scheduled. 
For incomplete development financed with loan or grant funds within the 
responsibility of the District Director, the District Director will take 
the necessary actions to assure that the borrower or grantee completes 
the planned development. For incomplete development financed with loan 
or grant funds within the responsibility of the County Supervisor, the 
District Director will give the necessary direction to the County 
Supervisor to assure completion of the work. In connection with these 
responsibilities, the District Director will consider:
    (1) The current farm and home operations with respect to the need 
for the development as originally planned.
    (2) Revisions to the development plan.
    (3) Funds remaining in the supervised bank account.
    (4) Need for additional funds.
    (5) Personal funds that could be furnished by the borrower.
    (6) Estimated completion dates.
    (7) The borrower's attitude with respect to completing the 
development.
    (b) After a complete review of the status of development in both the 
District and County Offices has been made, the District Director will 
make a written report to the State Director which will include 
observations and recommendations regarding incomplete development. The 
report may be included in the District Director's regular report, and 
will include:
    (1) The number of cases in which borrowers have not completed their 
development within 9, 15 or 24 months when authorized, and also the 
number of cases in which funds have been exhausted and the work is 
incomplete.
    (2) The number of borrowers who have not completed their development 
within 3 years from the loan closing, and indicate the action that was 
taken in each such case.
    (c) If the borrower has not completed development work within 3 
years after the date of loan closing and the District Director has 
determined that the borrower cannot or will not complete the 
development, the District Director will so indicate on Form FmHA or its 
successor agency under Public Law 103-354 1924-1 and request the State 
Director to withdraw, for application on the loan, any unused 
development funds remaining in the borrower's supervised bank account, 
if the borrower will not sign a check for a refund to the loan account.

[[Page 105]]



Sec. 1924.12  Warranty of development work.

    (a) Form FmHA or its successor agency under Public Law 103-354 1924-
19, ``Builder's Warranty,'' or an insured 10-year home warranty as 
described in exhibit L of this subpart, and normal trade warranties on 
items of equipment will be issued to the borrower at the completion of 
new building construction, dwelling rehabilitation by the contract 
method, all cases of newly completed and previously unoccupied dwellings 
or construction under conditional commitments issued to builders and 
sellers.
    (b) If the warranty is not an insured 10-year warranty, a completed 
Form FmHA or its successor agency under Public Law 103-354 1924-19, with 
warranty protection for 1 year, must be provided by the builder upon 
final acceptance of the work by the owner and FmHA or its successor 
agency under Public Law 103-354. If an insured 10-year warranty is 
provided, the requirements of exhibit L of this subpart apply, and a 
copy of the warranty insurance policy or a binder must have been 
received by FmHA or its successor agency under Public Law 103-354 prior 
to disbursement of the final payment to the builder.
    (c) If, for some reason, the warranty insurance policy cannot be 
issued, the contractor will be required to execute Form FmHA or its 
successor agency under Public Law 103-354 1924-19 and the case will be 
forwarded to the State Director for consideration of debarment under the 
provisions of subpart M of part 1940 (available in any FmHA or its 
successor agency under Public Law 103-354 office). The County Supervisor 
will assist the borrower to the extent necessary under the provisions of 
the warranty and subpart F of part 1924 of this chapter.
    (d) The County Supervisor will take the following action prior to 
the expiration of the first year of the warranty period:
    (1) As soon as the warranty has been executed, the follow-up date 
for sending Form FmHA or its successor agency under Public Law 103-354 
1924-21, ``Notice of Expiration of First Year of Warranty,'' which will 
be used for the 1 year warranty or the first year of the insured 10-year 
warranty, will be posted to the ``Servicing and Supervision'' section of 
the Management System card.
    (2) Form FmHA or its successor agency under Public Law 103-354 1924-
21 is provided for use in notifying the borrower of the expiration date 
of the first year of the warranty. This letter will be mailed to the 
borrower early in the second month preceding the expiration date of the 
first year of the warranty period.
    (3) If the County Supervisor or District Director does not hear from 
the borrower within 30 days, it can reasonably be assumed that no 
complaint exists or that any complaint has been satisfied unless 
information to the contrary has been received.
    (4) If the borrower notifies FmHA or its successor agency under 
Public Law 103-354 that any complaint has not been satisfied, an onsite 
inspection shall be made as early as possible, but not later than 1 
month preceding the expiration date of the first year of the warranty. 
The results of the inspection will be recorded on Form FmHA or its 
successor agency under Public Law 103-354 1924-12. If the borrower has 
complaints, the case should be handled in accordance with the provisions 
of subpart F of part 1924 of this chapter, or as otherwise provided in 
this subpart.

[52 FR 8002, Mar. 13, 1987, as amended at 54 FR 14334, Apr. 11, 1989]



Sec. 1924.13  Supplemental requirements for more complex construction.

    This section includes additional provisions that apply to planning 
and conduct of construction work on all multiple family housing projects 
and other projects that are more extensive in scope and more complex in 
nature than individual housing units or farm buildings. This section 
will apply in addition to all other requirements contained elsewhere in 
this subpart.
    (a) Architectural services. Complete architectural services, as 
defined in Sec. 1924.4(o)(1) of this subpart are recommended on all 
projects. They are required for projects involving an LH grant and for 
all loans for RRH, RCH, and LH projects consisting of more than 4 units 
unless prior consent to

[[Page 106]]

making an exception to the requirements for complete architectural 
services is obtained from the National Office. If the applicant or 
contractor is an architect or organization with architectural 
capability, the applicant must, nevertheless, hire an independent 
qualified architect or architectural firm to inspect the construction 
work and perform other needed services during the construction and 
warranty phases. See Guide 4, attachment 1, ``Attachment to AIA 
Document--Standard Form of Agreement Between Owner and Architect,'' for 
further information (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (1) Exception. Any request for National Office consent to an 
exception being made for complete architectural services should include 
the proposed drawings and specifications, method of providing specific 
services, the comments and recommendations of the FmHA or its successor 
agency under Public Law 103-354 State Architect, and any other pertinent 
information. The State Director must determine that any services for 
which an exception is requested can be performed by qualified State or 
District Office staff members.
    (2) Selecting the architect. The applicant is responsible for 
selecting the architect. The District Director with the advice of the 
State architect/engineer should discuss with the applicant the selection 
of the architect for the job as early as possible to assist in the site 
selection and participate in early consultations regarding project scope 
and design.
    (3) Architectural fees. Fees for architectural services shall not 
exceed the fee ordinarily charged by the profession for similar work 
when FmHA or its successor agency under Public Law 103-354 financing is 
not involved. The fee should cover only the architectural services 
rendered by the architect. The reduction or elimination of any services 
described in paragraph (a)(5) of this section shall be directly 
reflected in the fee. Fees for special services rendered by the 
architects, such as the packaging of the loan application or additional 
nonarchitectural services, will not be authorized to be paid with loan 
funds.
    (4) Agreement between borrower and architect. The borrower and the 
architect will execute a written agreement. The agreement must provide:
    (i) The services listed in paragraph (a)(5) of this section.
    (ii) The amount of the fee and how it will be determined and paid.
    (iii) That the agreement and any amendments to the agreement shall 
not be in full force and effect until concurred with in writing by the 
State Director or the State Director's delegate, and it will contain the 
following provision:

    The Farmers Home Administration or its successor agency under Public 
Law 103-354, as potential lender or insurer of funds to defray the costs 
of this agreement and without liability for any payments thereunder, 
hereby concurs in the form, content and the execution of this agreement.

Date____________________________________________________________________
FmHA or its successor agency under Public Law 103-354 Approval Official_
Title___________________________________________________________________

    (5) Specific services. Architectural services will include six 
consecutive phases as follows:
    (i) Schematic design phase. The architect will:
    (A) Consult with the applicant to obtain available information 
pertinent to the project requirements.
    (B) Consult with FmHA or its successor agency under Public Law 103-
354 State architect/engineer about FmHA or its successor agency under 
Public Law 103-354 requirements and procedures.
    (C) Assist in preparing the project design after analyzing 
engineering and survey data on the site selected by applicant.
    (D) Prepare schematic design studies consisting of drawings and 
other documents illustrating the scale and relationship of project 
components for the applicant's approval.
    (E) Submit estimates of current development costs based on current 
area, volume, or other unit costs.
    (F) When the applicant and FmHA or its successor agency under Public 
Law 103-354 have accepted the schematic design studies and estimated 
development costs, the project architect may

[[Page 107]]

be authorized to proceed with the next phase.
    (ii) Design development phase. The architect will:
    (A) Prepare the design development exhibits from the accepted 
schematic design studies for approval by the applicant. These exhibits 
should consist of drawings and other documents to fix and describe the 
size and character of the entire project as to structural, mechanical, 
and electrical systems, materials, and other essentials as appropriate.
    (B) Submit a further statement of probable construction cost.
    (C) Obtain applicant and FmHA or its successor agency under Public 
Law 103-354 approval of drawings, specifications, and authorization to 
proceed with next phase.
    (iii) Construction documents phase. The architect will:
    (A) Prepare the working drawings and specifications from the 
approved design development drawings and set forth in detail the 
requirements for the construction of the entire project in accordance 
with applicable regulations and codes; for example, necessary bidding 
information, assistance in preparing bidding forms, conditions of the 
construction contract, and the form of agreement between applicant/owner 
and contractor.
    (B) Submit a final and more comprehensive statement of probable 
development cost. It should show a breakdown of the estimated total 
development cost of the project and the various trades in enough detail 
for an adequate review.
    (C) Obtain the acceptance of the applicant and FmHA or its successor 
agency under Public Law 103-354 for contract documents, including 
approval of the final drawings and specifications and authorization to 
proceed.
    (D) Discuss with the applicant various items as they develop.
    (iv) Bidding or negotiation phase. The architect will, as 
appropriate, for a bidded or negotiated contract:
    (A) Assist in review and selection of bidders and submission of 
contract documents to selected bidders.
    (B) Assist in the interpretation of drawings and specifications, and 
other contract documents.
    (C) Receive and tabulate all bids.
    (D) Review the bids and the negotiated proposals and assist in the 
award and preparation of construction contracts.
    (v) Construction phase. This phase includes the administration of 
the construction contract. It will commence with the award of the 
construction contract and end when the borrower makes final payment to 
the contractor. The architect will:
    (A) Attend the preconstruction conference. Advise and consult with 
the borrower (or the borrower's representative) and issue the borrower's 
instructions to the contractor.
    (B) Prepare change orders.
    (C) Keep construction accounts and work as the general administrator 
of the project during construction.
    (D) Interpret the contract documents and have the authority to 
reject all work and materials which do not comply.
    (E) Review and approve shop drawings, samples, and other submissions 
of the contractor for conformance with the design concept and for 
compliance with the contract documents.
    (F) Conduct periodic inspections of all phases of construction to 
determine compliance with the contract documents and certify as to the 
amount is in place and materials suitably stored on site for partial 
payment estimates. These inspections will be augmented, when necessary, 
by inspections performed by structural, mechanical, and electrical 
representatives. Periodic inspections should be made as frequently as is 
necessary to verify that the work conforms with the intent of the 
contract documents and that a high quality of workmanship is maintained. 
The State Director may require a full-time project representative on 
projects with a total development cost of $750,000 or more, when in the 
opinion of the State Director there is a need for such representative, 
and the State Director states the reasons for such need to the borrower.
    (G) Determine, based on the inspections, the dates of substantial 
completion and final completion; receive on

[[Page 108]]

the borrower's behalf all written guarantees and related documents 
assembled by the contractor; and issue a final certificate for payment.
    (vi) Warranty phase. The architect will advise and consult with the 
borrower, as the borrower's representative, about items to be corrected 
within the warranty period. The architect will accompany the FmHA or its 
successor agency under Public Law 103-354 representative during the 
inspection required one month prior to expiration of the warranty 
period.
    (b) Other professional services. The State Director, on the 
recommendation of the State architect/engineer, may request that 
additional professional services be provided.
    (1) Professional services typically include soils engineering, 
structural engineering, civil engineering, surveying, land planning, or 
professional cost estimation or certification. Fees for these services 
may be paid directly by the borrower or by the architect as reimbursable 
expenses.
    (2) When a project representative is utilized, unless otherwise 
agreed, the representative will be provided by the consulting architect/
engineer. Prior to the preconstruction conference, the architect/
engineer will submit a resume of qualifications of the project 
representative to the applicant and to FmHA or its successor agency 
under Public Law 103-354 for acceptance in writing. If the applicant 
provided the project representative, the applicant must submit a resume 
of the representative's qualifications to the project architect/engineer 
and FmHA or its successor agency under Public Law 103-354 for acceptance 
in writing, prior to the preconstruction conference. The project 
representative will attend the preconstruction conference where duties 
and responsibilities will be fully discussed. The project representative 
will work under the general supervision of the architect/engineer. The 
project representative will maintain a daily diary in accordance with 
the following:
    (i) The diary shall be maintained in a hard-bound book.
    (ii) The diary shall have all pages numbered and all entries in ink.
    (iii) All entries shall be on daily basis, beginning with the date 
and weather conditions.
    (iv) Daily entries shall include daily work performed, number of men 
and equipment used in the performance of the work, and all significant 
happenings during the day.
    (v) The diary shall be made available to FmHA or its successor 
agency under Public Law 103-354 personnel and will be reviewed during 
project inspections.
    (vi) The project representative's diary will become the property of 
the owner after the project is accepted and final payments are made.
    (c) Drawings. The type and kinds of drawings should be in accordance 
with exhibit C of this subpart and subpart D of part 1944 of this 
chapter.
    (1) The drawings must be clear, accurate, with adequate dimensions 
and of sufficient scale for estimating purposes.
    (2) Construction sections and large-scale details sufficient for 
accurate bidding and for the purpose of correlating all parts of the 
work should be part of the general drawings. This is particularly 
important where the size of a project makes necessary the preparation of 
the general drawings at a scale of 1/8 inch equals 1 foot or less.
    (3) Mechanical and electrical work should be shown on separate 
plans.
    (4) Schedules should be provided for doors, windows, finishes, 
electrical fixtures, finish hardware, and any other specialty items 
necessary to clarify drawings.
    (d) Specifications. Trade-type specifications (specifications 
divided into sections for various trades) should be used. The 
specifications should be complete, clear, and concise, with adequate 
description of the various classes of work shown under the proper 
sections and headings.
    (e) Methods of administering construction. Projects involving a 
total development cost of less than $100,000 which do not include an LH 
grant may, with the approval of the State Director, follow the contract 
procedure in Sec. 1924.6(a) of this subpart without modification. 
Construction of all other projects, however, will be administered by the 
contract method or owner-builder method as set forth in this section.

[[Page 109]]

    (1) Contract method. This method of development will be used for all 
complex construction except in cases where owner-builder method is 
authorized. Development under this method is done in accordance with 
Sec. 1924.6(a) of this subpart except as modified by this paragraph. All 
construction work will be completed under one written construction 
contract. Guide 1, ``Contract Documents,'' of this subpart (available in 
any FmHA or its successor agency under Public Law 103-354 office) is 
provided to assist FmHA or its successor agency under Public Law 103-354 
personnel and applicants in assembling and reviewing contract documents 
for more complex construction such as that administered under this 
section.
    (i) Competitive bidding methods. (A) All construction contracts must 
be awarded on the basis of competitive bidding unless an exception is 
granted in accordance with paragraph (e)(1)(vii) of this section thereby 
permitting contract negotiation. The applicant's architect should 
prepare the bidding documents. Public notice must be given inviting all 
interested bidders to submit a bid. Prospective bidders may be contacted 
asking for their bids; however, public notice is necessary so that all 
local contractors have the opportunity to submit bids.
    (B) A bid bond is required from each bidder in the amount of 5 
percent of the bid price as assurance that the bidder will, upon 
acceptance of the bid, execute the required contract documents within 
the time specified.
    (C) The construction contract will be awarded based on the contract 
cost, and all conditions listed in the ``Invitation to Bid.''
    (D) If advertising does not provide a satisfactory bid in the 
opinion of the applicant and FmHA or its successor agency under Public 
Law 103-354, the applicant shall reject all bids and will then be free 
to negotiate with bidders on anyone else to obtain a satisfactory 
contract. The following conditions must be met:
    (1) The State Director determines that the original competitive bid 
process was handled in a satisfactory manner and that there is no 
advantage to advertising for competitive bid again.
    (2) The requirements of paragraph (e)(1)(vii) of this section are 
met.
    (E) If there is no agreement by FmHA or its successor agency under 
Public Law 103-354 and the applicant as to the construction cost, the 
State Director will cease any further action on the preapplication and 
inform the applicant of the right to appeal in accordance with subpart B 
of part 1900 of this chapter.
    (ii) Contract documents. Contract documents will conform with 
recognized professional practices as prescribed in this paragraph. Such 
contract documents will contain substantially the following:

Item I  Invitation for Bids (Form FmHA or its successor agency under 
Public Law 103-354 1924-5)
Item II  Information for Bidders
Item III  Bid
Item IV  Bid Bond
Item V  Agreement (Construction Contract)
Item VI  Compliance Statement (Form FmHA or its successor agency under 
Public Law 103-354 400-6)
Item VII  General Conditions
Item VIII  Supplemental General Conditions
Item IX  Payment Bond (exhibit F of this subpart)
Item X  Performance Bond (exhibit G of this subpart)
Item XI  Notice of Award
Item XII  Notice of Proceed
Item XIII  Drawings and Specifications
Item XIV  Addenda
Item XV  Contract Change Order (Form FmHA or its successor agency under 
Public Law 103-354 1924-7)
Item XVI  Labor Standards Provisions [Where applicable]
Item XVII  Monthly Employment Utilization Report (Form CC-257)
Item XVIII  Partial Payment Estimate (Form FmHA or its successor agency 
under Public Law 103-354 1924-18)
Item XIX  Builder's Warranty (Form FmHA or its successor agency under 
Public Law 103-354 1924-19)

    (A) Substitution of term ``architect'' for ``engineer'' may be 
necessary on some of the forms. Other modifications may be necessary in 
some cases to conform to the nature and extent of the project. All such 
contract documents and related items will be concurred with by the State 
Director, with the assistance of OGC prior to the release of invitations 
to bid.
    (B) Items listed as I through IV and item XI of paragraph (e)(1)(ii) 
of this

[[Page 110]]

section may be omitted when an exception to the competitive bidding 
requirement is granted in accordance with paragraph (e)(1)(vii) of this 
section, thereby permitting a negotiated contract.
    (C) All negotiated contracts shall include a provision to the effect 
that the borrower, USDA, the Comptroller General of the United States, 
or any of their duly authorized representatives, shall have access to 
any books, documents, papers, and records of the contractor which are 
directly pertinent to a specific Federal loan program for the purpose of 
making audit, examination, excerpts, and transcriptions.
    (D) A provision of liquidated damages will be included in all 
contracts. The liquidated damage amount must be reasonable and represent 
the best estimate possible of how much interest or other costs will 
accrue on the loan, and also represent any loss of rent or other income 
which would result from a delay in the completion of the project beyond 
the estimated completion date.
    (E) All contracts shall include a provision for compliance with the 
Copeland ``Anti-Kickback'' Act (18 U.S.C. 874) as supplemented in 
Department of Labor regulations (29 CFR part 3). This Act prohibits 
anyone from inducing any person in connection with the construction to 
give up any part of the compensation to which the person is otherwise 
entitled.
    (F) All contracts will contain a certification by the applicant 
indicating that there is not now nor will there be an identity of 
interest between the applicant and any of the following: Contractor, 
architect, engineer, attorney, subcontractors, material suppliers, 
equipment lessors, or any of their members, directors, officers, 
stockholders, partners, or beneficiaries unless specifically identified 
to FmHA or its successor agency under Public Law 103-354 in writing 
prior to the award of the contract. All contracts must also indicate 
that when any identity of interest exists or comes into being, the 
contractor agrees to have construction costs as reported to FmHA or its 
successor agency under Public Law 103-354 on Form 1924-13, ``Estimate 
and Certificate of Actual Cost,'' audited by a Certified Public 
Accountant (CPA) or Licensed Public Accountant (LPA) licensed prior to 
December 31, 1970, who will provide an opinion as to whether the Form 
FmHA or its successor agency under Public Law 103-354 1924-13 presents 
fairly the costs of construction in conformity with eligible 
construction costs as prescribed in FmHA or its successor agency under 
Public Law 103-354 regulations.
    (G) All contracts on any form other than Form FmHA or its successor 
agency under Public Law 103-354 1924-6, must contain the language of 
clause (D) of Form FmHA or its successor agency under Public Law 103-354 
1924-6, which is available in all FmHA or its successor agency under 
Public Law 103-354 offices. The language of clause (D) of Form FmHA or 
its successor agency under Public Law 103-354 1924-6 sets forth the 
Notice of Requirement for Affirmative Action to Ensure Equal Employment 
Opportunity required by Executive Order 11246, the Equal Opportunity 
clause published at 41 CFR 60-1.4 (a) and (b), and the Standard Federal 
Equal Employment Opportunity Construction Contract Specifications 
required by Executive Order 11246. For contract forms other than Form 
FmHA or its successor agency under Public Law 103-354 1924-6, Form AD 
767, ``Equal Employment Opportunity Contract Compliance Notices,'' which 
can be obtained from the Finance Office, should be attached and made a 
part of the contract.
    (H) All contracts will contain a provision that they are not in full 
force and effect until concurred with by the State Director or the State 
Director's delegate, in writing. Therefore, before loan closing or 
before the start of construction, whichever occurs first, the State 
Director or the State Director's delegate will concur in the contract 
form, content, and execution if acceptable, by including the following 
paragraph at the end of the contract:

    The Farmers Home Administration or its successor agency under Public 
Law 103-354, as potential lender or insurer of funds to defray to costs 
of this contract, and without liability for any payments thereunder, 
hereby concurs in the form, content, and execution of this contract.

Date____________________________________________________________________
________________________________________________________________________


[[Page 111]]

________________________________________________________________________
FmHA or its successor agency under Public Law 103-354 Official
________________________________________________________________________
Title

    (I) The requirements of Sec. 1924.6 (a)(11)(iv) of this subpart 
apply to all contracts or subcontracts in excess of $10,000.
    (iii) Surety. When multiple advances of loan or grant funds are 
utilized, surety that guarantees both payment and performance in the 
full amount of the contract will be provided in accordance with 
Sec. 1924.6(a)(3)(ii) of this subpart. Exceptions to the surety 
requirements shall be governed by the following:
    (A) In accordance with the guidance and recommendations of OMB 
Circulars A-102 and A-110, exceptions to the surety requirements of 
Sec. 1924.6(a)(3)(ii) of this subpart will not be granted for nonprofit 
organization or public body applicants.
    (B) For loans or grants to applicants other than non-profit 
organizations or public bodies that are within the State Director's 
approval authority, the State Director may, upon request of the borrower 
or grantee, grant exceptions to the surety requirements in accordance 
with the provisions of Sec. 1924.6(a)(3)(iii) of this subpart. Before 
granting such an exception, however, the State Director should be 
provided the following information from the proposed contractor in order 
to fully evaluate the experience and capabilities of the contractor:
    (1) A resume indicating the contractor's history, ability and 
experience.
    (2) A current, dated and signed financial statement of the 
contractor's operations indicating the payment status of accounts and 
any contingent liabilities that may exist. FmHA or its successor agency 
under Public Law 103-354 personnel will be responsible for analyzing the 
financial statement as to the sufficiency of the contractor's financial 
capability to carry out construction. The financial strength must 
demonstrate the ability of the contractor to pay all bills prior to 
receiving periodic draws of funds from the lender.
    (3) A credit report (obtained at no expense to FmHA or its successor 
agency under Public Law 103-354) attesting to the contractor's credit 
standing.
    (4) A listing of trade references that could be contacted to 
substantiate the contractor's experience and good standing.
    (5) Statements from owners for whom the contractor has done similar 
work, indicating the scope of the work and the owner's evaluation of the 
contractor's performance.
    (C) For loans or grants to applicants other than non-profit 
organization or public bodies that are in excess of the State Director's 
approval authority, the State Director may request National Office 
authorization to grant one of the exceptions to the surety requirements 
as indicated in Sec. 1924.6(a)(3)(iii) of this subpart. The following 
information must be submitted with the request to the National Office:
    (1) An explanation of why interim financing is not available.
    (2) An explanation of why the proposed contractor cannot obtain 
surety bonds meeting the requirements of Sec. 1924.6(a)(3)(ii) of this 
subpart.
    (3) The information listed in paragraph (e)(1)(iii)(B) of this 
section.
    (4) The drawings and specifications for the proposed project, 
together with the comments of the State architect/engineer.
    (5) The applicant's written request for an exception.
    (6) An explanation of why the requirements of Sec. 1924.6(a)(3)(iii) 
(A) or (B) of this subpart cannot be met in those cases where the State 
Director requests authorization to grant an exception as indicated in 
Sec. 1924.6(a)(3)(iii)(C) of this subpart. When such a request is made, 
the documentation required of the contractor under the provision must 
also be forwarded.
    (7) The State Director's recommendation.
    (D) Adequate steps will be taken to protect the interests of the 
borrower and the government in accordance with the payment provisions of 
Sec. 1924.6(a)(12)(i) of this subpart and any alternative as outlined in 
Sec. 1924.6(a)(3)(iii)(c) of this subpart.
    (iv) Contract cost breakdown. In any case where the loan approval 
official feels it appropriate, and prior to the award or approval of any 
contract in

[[Page 112]]

which there is an identity of interest as defined in Sec. 1924.4 (i) of 
this subpart, the contractor and any subcontractor, material supplier or 
equipment lessor sharing an identity of interest must provide the 
applicant and FmHA or its successor agency under Public Law 103-354 with 
a trade-item cost breakdown of the proposed contract amount for 
evaluation. The cost of any surety as required by Sec. 1944.222 (h) and 
(i) of subpart E of part 1944 of this chapter and Sec. 1924.6(a)(3) of 
this subpart, or cost certification as required by paragraph (e)(1)(v) 
of this section, will be included in the proposed contract amount and 
shown under General Requirements on Form FmHA or its successor agency 
under Public Law 103-354 1924-13, which is available in all FmHA or its 
successor agency under Public Law 103-354 offices. FmHA or its successor 
agency under Public Law 103-354 personnel will be responsible for 
reviewing the estimates on Form FmHA or its successor agency under 
Public Law 103-354 1924-13 to determine if the dollar amounts total 
correctly, to assure that costs are categorized under their appropriate 
columns, and to confirm that the estimated costs for all line items are 
reasonable and customary for the State.
    (v) Cost certification. Whenever the State Director determines it 
appropriate, and in all situations where there is an identity of 
interest as defined in Sec. 1924.4(i) of this subpart, the borrower, 
contractor and any subcontractor, material supplier, or equipment lessor 
having an identity of interest must each provide certification using 
Form FmHA or its successor agency under Public Law 103-354 1924-13 as to 
the actual cost of the work performed in connection with the 
construction contract. The construction costs, as reported on Form FmHA 
or its successor agency under Public Law 103-354 1924-13, must also be 
audited, in accordance with Government Auditing Standards, by a CPA, or 
LPA licensed on or before December 31, 1970. In addition, certain agreed 
upon procedures (available in any FmHA or its successor agency under 
Public Law 103-354 office) will be performed in accordance with 
Attestation Standards. In some cases, FmHA or its successor agency under 
Public Law 103-354 will contract directly with a CPA or LPA for the cost 
certification. In that event, documentation necessary to have the costs 
of construction certified by an FmHA or its successor agency under 
Public Law 103-354 contractor that they were the actual costs of the 
work performed, as reported on Form FmHA or its successor agency under 
Public Law 103-354 1924-13, will be provided. Funds which were included 
in the loan for cost certification and which are ultimately not needed 
because FmHA or its successor agency under Public Law 103-354 contracts 
for the cost certification will be returned on the loan. FmHA or its 
successor agency under Public Law 103-354 personnel will utilize exhibit 
M of this subpart (available in any FmHA or its successor agency under 
Public Law 103-354 office) and Form FmHA or its successor agency under 
Public Law 103-354 1924-26, ``Cost Certification Worksheet,'' to assist 
in the evaluation of the cost certification process.
    (A) Prior to the start of construction, the borrower, contractor and 
any subcontractor, material supplier, or equipment lessor sharing an 
identity of interest must submit, to the CPA or LPA, the accounting 
system that the borrower, contractor, subcontractor, material supplier 
or equipment lessor and/or the CPA or LPA proposes to set up and use in 
maintaining a running record of the actual cost. In order to be 
acceptable, the borrower must provide a written assertion that it has an 
accounting system that is suitably designed to provide for a trade-item 
basis comparison of the actual cost as compared to the estimated cost 
submitted on Form FmHA or its successor agency under Public Law 103-354 
1924-13. Costs pertaining to a specific line item will be set up in the 
accounting system for that particular account. For instance, only costs 
of materials, supplies, equipment, and labor associated with concrete 
will be shown in the concrete account. The accounting system must also 
restrict costs to those pertaining to a specific project so that costs 
from multiple projects will not be co-mingled. The independent CPA or 
LPA shall report on the borrower's assertion in accordance with the 
Standards for

[[Page 113]]

Attestation Engagements of the American Institute of Certified Public 
Accountants (AICPA). The borrower's and the CPA or LPA's reports on the 
accounting system shall be provided to FmHA or its successor agency 
under Public Law 103-354 by the borrower.
    (B) Prior to final payment to anyone required to cost certify, a 
trade-item breakdown showing the actual cost compared to the estimated 
cost must be provided to the owner and FmHA or its successor agency 
under Public Law 103-354. Form FmHA or its successor agency under Public 
Law 103-354 1924-13 is the form of comparative breakdown that must be 
used, and contains the certifications required of the applicant and 
contractor prior to final payment. The amounts for builder's general 
overhead, builder's profit, and general requirements, respectively, 
shall not exceed the amounts represented on the estimate of cost 
breakdown provided in accordance with paragraph (e)(1)(iv) of this 
section for any contractor, subcontractor, material supplier, or 
equipment lessor having or sharing an identity of interest with the 
borrower. The amounts for general overhead, builder's profit, and 
general requirements must be established prior to FmHA or its successor 
agency under Public Law 103-354 approving the construction contract and 
will not be changed during the course of construction. This applies to 
all contractors, subcontractors, material suppliers, or equipment 
lessors having or sharing an identity of interest with the applicant. 
Contract change orders will be processed to adjust the contract amount 
downward prior to the final payment to the contractor, if necessary, to 
assure that the amounts shown in the certificate of actual costs do not 
exceed the amounts represented in the contract cost breakdown. Reduction 
in the builder's profit, and general overhead if needed, will 
counterbalance any increase reflected in the contract costs. Any funds 
remaining as a result of hard cost savings will be applied to the 
account as an extra payment or used for eligible loan purposes approved 
by FmHA or its successor agency under Public Law 103-354 as long as the 
improvements are genuinely needed and will enhance marketability of the 
project. All increases or decreases of 15 percent or more in line item 
costs will require documentation as to the reason for the increases and/
or decreases. The State Director may require documentation for increases 
and/or decreases of less than 15 percent, if he/she determines it 
necessary. This information will be required with the cost 
certification.
    (C) The CPA or LPA audit, performed in accordance with Government 
Auditing Standards, will include such tests of the accounting records 
and such other auditing procedures of the borrower and the contractor 
(and any subcontractor, material supplier or equipment lessor sharing an 
identity of interest) concerning the work performed, services rendered, 
and materials supplied in accordance with the construction contract he/
she considers necessary to express an opinion on the construction costs 
as reported on Form FmHA or its successor agency under Public Law 103-
354 1924-13. The CPA or LPA shall also perform the additional agreed 
upon procedures specified by FmHA or its successor agency under Public 
Law 103-354 (available in any FmHA or its successor agency under Public 
Law 103-354 office), performed in accordance with Attestation Standards, 
for the applicant and the contractor (and any subcontractor, material 
supplier, or equipment lessor sharing an identity of interest) 
concerning the work performed, services rendered, and materials supplied 
in accordance with the construction contract.
    (D) Upon completion of construction and prior to final payment, the 
CPA or LPA will provide an opinion concerning whether the construction 
costs, as reported on Form FmHA or its successor agency under Public Law 
103-354 1924-13, present fairly the costs of construction in conformity 
with eligible construction costs as prescribed in FmHA or its successor 
agency under Public Law 103-354 regulations.
    (E) In some cases, cost certification will be obtained by FmHA or 
its successor agency under Public Law 103-354 through direct contract 
with the CPA or LPA. The borrower and his/her CPA or LPA will cooperate 
fully with the contract CPA or LPA by providing all documentation 
necessary to conduct

[[Page 114]]

the certification. FmHA or its successor agency under Public Law 103-354 
reserves the right to determine, upon receipt of the certified Form FmHA 
or its successor agency under Public Law 103-354 1924-13 and the 
auditor's report, whether they are satisfactory to FmHA or its successor 
agency under Public Law 103-354. If not satisfactory to FmHA or its 
successor agency under Public Law 103-354, the borrower will be 
responsible for providing additional information.
    (F) There will exist no business relationship between the CPA or LPA 
and the borrower except for the performance of the examination of the 
cost certification, accounting systems work, and tax preparation. Any 
CPA or LPA who acts as the borrower's accountant (performing manual or 
automated bookkeeping services or maintains the official accounting 
records) will not be the same CPA or LPA who cost certifies the project.
    (G) Forms FmHA or its successor agency under Public Law 103-354 
1944-30, ``Identity of Interest (IOI) Disclosure Certificate'' and FmHA 
or its successor agency under Public Law 103-354 1944-31, ``Identity of 
Interest (IOI) Qualification Form,'' provide written notification to the 
borrower that willful and intentional falsification of cost 
certification documents will result in debarment of all violators in 
accordance with the provisions of FmHA or its successor agency under 
Public Law 103-354 Instruction 1940-M (available in any FmHA or its 
successor agency under Public Law 103-354 office). These forms require 
the disclosure of all identities of interest associated with project 
construction, certify the entity's ability to provide the contracted 
service, and cite the penalties for failure to disclose or falsify such 
certification. Each applicant/borrower will be required to complete and 
sign the forms (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (H) Subcontracting development work.
    (1) Contractors will not be allowed to obtain a profit and overhead 
unless they are performing actual construction. ``Actual construction'' 
means ``work'' as defined in American Institute of Architects (AIA) 
documents: ``* * * labor, materials, equipment, and services provided by 
the contractor to fulfill the contractor's obligations.'' Under this 
definition, contractors who choose to subcontract out construction of 
the project to another contractor will not obtain a builder's fee 
(general overhead and profit) when:
    (i) More than 50 percent of the contract sum in the construction 
contract is subcontracted to one subcontractor, material supplier, or 
equipment lessor, and/or
    (ii) Seventy-five percent or more with three or fewer 
subcontractors, material suppliers and/or equipment lessors.
    (2) Note: If two or more subcontractors have common ownership, they 
are considered as one subcontractor.
    (3) How to apply rule:
    (i) The 50 percent rule will apply when division of the amount of 
the largest subcontract by the contract sum of the construction contract 
results in more than 50 percent.
    (ii) The 75 percent rule will apply when division of the sum of the 
amounts of the three largest subcontracts by the contract sum of the 
construction contract results in 75 percent or more.
    (I) Qualified contracting entities. Contractors, subcontractors, 
material suppliers, and any other individual or organization sharing an 
identity of interest and providing materials or services for the project 
must certify that it is a viable, ongoing trade or business qualified 
and properly licensed to undertake the work for which it intends to 
contract. Form FmHA or its successor agency under Public Law 103-354 
1944-31 will be prepared and executed by the contracting entities. The 
form provides notification to the entities of the penalty, under law, 
for erroneously certifying to the statements contained therein. 
Debarment actions will be instituted against entities who fail to 
disclose an identity of interest in accordance with the provisions of 
FmHA or its successor agency under Public Law 103-354 Instruction 1940-M 
(available in any FmHA or its successor agency under Public Law 103-354 
office).
    (vi) Method of payments. Partial payments may be requested in 
accordance

[[Page 115]]

with the terms of the construction contract on Form FmHA or its 
successor agency under Public Law 103-354 1924-18, ``Partial Payment 
Estimate,'' or other professionally recognized form that contains the 
architect's certification, approval of the owner, and conditional 
acceptance of FmHA or its successor agency under Public Law 103-354 as 
shown in Form FmHA or its successor agency under Public Law 103-354 
1924-18.
    (A) If interim financing is available at reasonable rates and terms 
for the construction period, such financing shall be obtained. exhibit B 
of subpart E of part 1944 of this chapter shall be used to inform the 
interim lender that FmHA or its successor agency under Public Law 103-
354 will not close its loan until the project is substantially complete, 
ready for occupancy, evidence is furnished indicating that all bills 
have been paid or will be paid at loan closing for work completed on the 
project, all inspections have been completed and all required approvals 
have been obtained from municipal and governmental authorities having 
jurisdiction over the project.

Upon presentation of proper partial payment estimates approved by the 
applicant and accepted by FmHA or its successor agency under Public Law 
103-354, the interim lender may advance construction funds in accordance 
with the payment terms of the contract. It is suggested that partial 
payments not exceed 90 percent of the value of work in place and 
materials suitably stored on site.
    (B) When interim financing is not available, payments will be made 
in accordance with Sec. 1924.6(a)(12) of this subpart.
    (vii) Exception to competitive bidding--(A) For all applicants. An 
applicant may negotiate a construction contract provided the State 
Director grants an exception and documentation shows that:
    (1) The contract price is competitive with other projects similar in 
construction and design being built in the area.
    (2) The proposed contractor is experienced in construction of 
projects of similar size, scope, and complexity, and is recognized as a 
reliable builder.
    (3) The proposed development work meets all requirements of this 
subpart.
    (4) If appropriate for nonprofit organizations and public bodies, 
the applicant provides a copy of a duly authorized resolution by its 
governing body requesting FmHA or its successor agency under Public Law 
103-354 to permit awarding the construction contract without formal 
bidding.
    (5) The applicant is permitted by state law, local law and/or 
organizational by-laws to negotiate a construction contract.
    (6) The requirements of paragraphs (e)(1) (ii), (iii), (iv) and (v) 
of this section are met.
    (B) In considering an exception to competitive bidding, the 
following additional steps will be taken in all cases.
    (1) If, after a full review of the case documents by the appropriate 
members of the State Office staff, the State Director determines that 
the requirements have been met and the costs are reasonable, an 
exception to competitive bidding may be granted. Written documentation 
of the State Office review results will be placed in the application 
file.
    (2) If after the full review by the State Office staff, the State 
Director determines that the negotiated contract price is not 
competitive with other similar projects in construction and design being 
built in the area, the applicant will be requested to competitively bid 
the construction of the project in accordance with paragraph (e)(1)(i) 
of this section.
    (3) If there is no agreement by FmHA or its successor agency under 
Public Law 103-354 and the applicant as to the construction cost, the 
State Director will cease any further action on the preapplication and 
inform the applicant of the right to appeal in accordance with subpart B 
of part 1900 of this chapter.
    (C) Any requests for exceptions to competitive bidding that are not 
covered in this section may be submitted to the National Office for 
consideration.
    (viii) Exception to contract method--public body. With the approval 
of the National Office, the State Director may grant to a public body an 
exception to the requirement for using contract method construction 
under the following circumstances:

[[Page 116]]

    (A) The loan or grant is for repair or rehabilitation of existing 
facilities and it is not practicable to perform all work by the contract 
method.
    (B) The applicant has the managerial ability and qualified employees 
necessary to complete the work successfully.
    (C) That applicant submits a written request to the District 
Director indicating:
    (1) The scope of work and construction timetable;
    (2) What phases of work can be contracted and what cannot;
    (3) Why is it not practicable to contract all phases;
    (4) Management ability and employee qualifications for performing 
the work;
    (5) Proposed method of fund control and frequency of payments;
    (6) How changes in scope of work and construction timetable will be 
approved; and,
    (7) Proposed method of certifying progress and requesting payments.
    (D) The request, recommendations of the District Director, 
appropriate members of the State Office staff and the State Director and 
the application file will be sent to the National Office.
    (2) Owner-builder method. This method of development is used only 
when requested by profit or limited profit RRH applicants when the 
applicant or any of its controlling principals (such as stockholders, 
members, partners other than limited partners, directors, or officers), 
are general contractors by profession, and will serve as the builder of 
the project without a written construction contract. The State Director 
may make an exception to the contract method of construction and 
authorize proceeding by the owner-builder method of construction in 
accordance with the provisions of this section if the amount of the 
loan(s) does not exceed the State Director's approval authority. For 
projects over the State Director's authority, prior written consent of 
the National Office is required. In such cases, the drawings, 
specifications, cost estimates, copy of the State Architect/Engineer's 
review and detailed information on the applicant's qualifications will 
be submitted to the National Office along with the State Director's 
recommendations.
    (i) The applicant's request to construct a project by the owner-
builder method of construction shall be in the form of a letter giving 
specific and detailed information concerning the owner-builder's 
proposal, and the qualifications and past experience of the owner-
builder. The following information must be included with the request:
    (A) A resume indicating the owner-builder's history, ability, and 
experience.
    (B) Dated and signed financial statements on the owner-builder's 
operation (including balance sheets and statements of income and 
expense) from current and prior years indicating the payment status of 
the owner-builder's accounts and any contingent liabilities that may 
exist. FmHA or its successor agency under Public Law 103-354 personnel 
will be responsible for analyzing the financial statement as to the 
sufficiency of the owner-builder's financial capability to carry out 
construction. The financial strength must demonstrate the ability of the 
owner-builder to pay all bills prior to receiving periodic draws of 
funds from the lender.
    (C) A written, dated, and signed statement agreement to provide any 
funds necessary in excess of the applicant's contribution and the loan 
amount to complete the project.
    (D) A credit report (obtained at no expense to FmHA or its successor 
agency under Public Law 103-354) attesting to the owner-builder's credit 
standing.
    (E) A listing of trade references that could be contacted to 
substantiate the owner-builder's experience and good standing.
    (F) Statements from other persons for whom the owner-builder has 
done similar work, indicating the scope of the work and that person's 
evaluation of the owner-builder's performance.
    (G) A current, dated, and signed trade-item cost breakdown of the 
estimated total development cost of the project which has been prepared 
by the applicant/owner-builder. Form FmHA or its successor agency under 
Public Law 103-354 1924-13 will be used for this purpose. If cost 
certification services are required by FmHA or its successor agency 
under Public Law 103-354, the cost of such services may be included

[[Page 117]]

in the total development cost of the project. Any subcontractor, 
material supplier, or equipment lessor sharing an identity of interest 
with the applicant/owner-builder as defined in Sec. 1924.4(i) of this 
subpart must also provide a trade-item cost breakdown of the proposed 
amount.
    (H) Prior to the start of construction, the owner-builder and any 
subcontractor, material supplier, or equipment lessor sharing an 
identity of interest must submit, to the CPA or LPA, the accounting 
system that the owner-builder, subcontractor, material supplier or 
equipment lessor and/or the CPA or LPA proposes to set up and use in 
maintaining a running record of the actual cost. In order to be 
acceptable, the owner-builder must provide a written assertion that it 
has an accounting system that is suitably designed to provide for a 
trade-item basis comparison of the actual cost as compared to the 
estimated cost submitted on Form FmHA or its successor agency under 
Public Law 103-354 1924-13. Costs pertaining to a specific line item 
will be set up in the accounting system for that particular account. For 
instance, only costs of materials, supplies, equipment, and labor 
associated with concrete will be shown in the concrete account. The 
accounting system must also restrict costs to those pertaining to a 
specific project so that costs from multiple projects will not be co-
mingled. The independent CPA or LPA shall report on the owner-builder's 
assertion in accordance with the Standards for Attestation Engagements 
of the AICPA. The owner-builder's and the CPA or LPA's reports on the 
accounting system shall be provided to FmHA or its successor agency 
under Public Law 103-354 by the owner-builder.
    (I) A written, dated, and signed statement agreeing to permit U.S. 
Department of Agriculture, the Comptroller General of the United States, 
or any of their duly authorized representatives, to have access to any 
books, documents, papers, and records which are directly pertinent to 
the specific Federal program for the purpose of making audit, 
examination, excerpts and transcriptions.
    (ii) In order to grant an exception to the contract method of 
construction and proceed with the owner-builder method of construction, 
the State Director must determine that the following conditions exist:
    (A) The applicant or at least one of its principals is a fully 
qualified and licensed (if necessary under applicable local law) builder 
by profession, has adequate experience in constructing the type of units 
proposed as well as projects of similar size, scope, and complexity and 
will be able to complete the work in accordance with the FmHA or its 
successor agency under Public Law 103-354 approved drawings and 
specifications.
    (B) Based upon the information presented in the applicant's 
financial statements, the applicant is presently able and is likely to 
continue to be able to provide any funds necessary in excess of the 
applicant's contribution and the loan amount to complete the project.
    (C) The total development cost of the project does not exceed that 
which is typical for similar type projects in the area. The total 
development cost recognized by FmHA or its successor agency under Public 
Law 103-354 for each individual case will be determined by the MFH 
Coordinator with the advice of the State Architect.
    (D) The owner-builder has provided sufficient information on all 
contracts or subcontracts in excess of $10,000 to permit compliance with 
Sec. 1924.6(a)(11)(iv) of this subpart.
    (iii) In addition to the requirements for the State Director to 
authorize the owner-builder method of construction as indicated in 
Sec. 1924.13(e)(2) (i) and (ii) of this subpart, the following 
additional steps will be taken by the State Director.
    (A) If, after a full review of the case documents by the appropriate 
members of the State Office staff, the State Director determines that 
the requirements have been met and the construction cost is reasonable, 
an exception to competitive bidding may be granted. Written 
documentation of the State Office review results will be placed in the 
application file.
    (B) If, after the full review by the State Office staff, the State 
Director

[[Page 118]]

determines that the construction cost is not competitive with other 
similar projects in construction and design being built in the area, the 
applicant will be requested to competitively bid the construction of the 
project in accordance with paragraph (e)(1)(i) of this section.
    (C) If there is no agreement by FmHA or its successor agency under 
Public Law 103-354 and the applicant as to construction cost and the 
applicant is not agreeable to any of the aforementioned alternatives, 
the State Director will cease any further action on the preapplication 
and inform the applicant of the right to appeal, in accordance with 
subpart B of part 1900 of this chapter.
    (iv) The development cost of the project may include a typical 
allowance for general overhead, general requirements and a builder's 
profit. These amounts may be determined by local investigation and also 
from HUD data for the area. The applicant/owner-builder and any 
subcontractors, material suppliers and equipment lessors having or 
sharing an identity of interest with the applicant/owner-builder may not 
be permitted a builder's profit, general overhead, and general 
requirements which exceed the amounts represented on their cost 
breakdown.
    (v) Under no circumstances will loan funds be used to pay the owner/
builder or its stockholders, members, directors or officers, directly or 
indirectly, any profits from the construction of the project except a 
typical builder's fee for performing the services that would normally be 
performed by a general contractor under the contract method of 
construction. Discounts and rebates given the owner-builder in advance 
must be deducted before the invoices are paid. If discounts or rebates 
are given after the invoices are paid, the funds must be returned to the 
supervised bank account or applied on the interim construction loan, as 
appropriate. Under no circumstances will the dollar amount be placed in 
the reserve account.
    (vi) The plan and specifications must be specific and complete so 
that there is a clear understanding as to how the facility will be 
constructed and the materials that will be used.
    (vii) When architectural services are required by Sec. 1924.13(a) 
during the construction and warranty phases they must be provided by an 
architect who has no identity of interest with the applicant/owner-
builder. The services to be rendered during the construction and 
warranty phases include, but are not limited to inspections, changes in 
the scope of project or work to be done, administration of construction 
accounts, rejection of work and materials not conforming to the FmHA or 
its successor agency under Public Law 103-354 approved drawings and 
specifications, and other appropriate service listed in 
Sec. 1924.13(a)(5) (v) and (vi) of this subpart.
    (viii) The applicant/owner-builder and any subcontractor, material 
supplier, or equipment lessor sharing an identity of interest as defined 
in Sec. 1924.4(i) of this subpart must each provide certification as to 
the actual cost of the work performed in connection with the 
construction of the project on Form FmHA or its successor agency under 
Public Law 103-354 1924-13 prior to final payment. The construction 
costs, as reported on Form FmHA or its successor agency under Public Law 
103-354 1924-13, must be audited by a CPA, or LPA licensed on or before 
December 31, 1970, in accordance with Government Auditing Standards, and 
certain agreed upon procedures (available in any FmHA or its successor 
agency under Public Law 103-354 office) performed in accordance with 
Attestation Standards. In some cases, FmHA or its successor agency under 
Public Law 103-354 will contract directly with a CPA or LPA for the cost 
certification. In that event, documentation necessary to have the costs 
of construction certified by an FmHA or its successor agency under 
Public Law 103-354 contractor that they were the actual costs of the 
work performed, as reported on Form FmHA or its successor agency under 
Public Law 103-354 1924-13, will be provided. Funds which were included 
in the loan for cost certification and which are ultimately not needed 
because FmHA or its successor agency under Public Law 103-354 contracts 
for the cost certification will be returned on the loan.

[[Page 119]]

    (A) The CPA or LPA's audit, performed in accordance with Government 
Auditing Standards, will include such tests of the accounting records 
and such other auditing procedures of the applicant/owner-builder (and 
any subcontractor, material supplier, or equipment lessor sharing an 
identity of interest) concerning the work performed, services rendered, 
and materials supplied in connection with the construction of the 
project he/she considers necessary to express an opinion on the 
construction costs as reported on Form FmHA or its successor agency 
under Public Law 103-354 1924-13. Upon completion of construction and 
prior to final payment, the CPA or LPA will provide an opinion as to 
whether the construction costs as reported on Form FmHA or its successor 
agency under Public Law 103-354 1924-13 present fairly the costs of 
construction in conformity with eligible construction costs as 
prescribed in FmHA or its successor agency under Public Law 103-354 
regulations. FmHA or its successor agency under Public Law 103-354 
reserves the right to determine, upon receipt of the certified Form FmHA 
or its successor agency under Public Law 103-354 1924-13 and the 
auditor's report, whether they are satisfactory to FmHA or its successor 
agency under Public Law 103-354. At a minimum, the CPA or LPA shall also 
perform any additional agreed upon procedures (available in any FmHA or 
its successor agency under Public Law 103-354 office) specified by FmHA 
or its successor agency under Public Law 103-354, performed in 
accordance with Attestation Standards, of the owner-builder (and any 
subcontractor, material supplier, or equipment lessor sharing an 
identity of interest) concerning the work performed, services rendered, 
and materials supplied in connection with the construction. There will 
exist no business relationship between the CPA or LPA and the borrower 
except for the performance of the examination of the cost certification, 
accounting systems work, and tax preparation. Any CPA or LPA who acts as 
the borrower's accountant (performing manual or automated bookkeeping 
services or maintains the official accounting records) will not be the 
same CPA or LPA who cost certifies the project.
    (B) Prior to final payment to anyone required to cost certify, FmHA 
or its successor agency under Public Law 103-354 must be provided with a 
certification and a trade-item breakdown showing the actual cost 
compared to the estimated cost furnished in accordance with paragraph 
(e)(2)(i)(G) of this section. Form FmHA or its successor agency under 
Public Law 103-354 1924-13 is the form of comparative breakdown that 
must be used, and contains the certification required of the applicant/
owner-builder prior to final payment. The amounts for builder's general 
overhead, general requirements, and builder's profit shall not exceed 
the amounts represented on the estimate of cost breakdown provided in 
accordance with paragraph (e)(2)(i)(G) of this section for the owner-
builder or any subcontractor, material supplier, or equipment lessor 
having or sharing an identity of interest with the applicant/owner-
builder. Final payment to the owner-builder will be adjusted, if 
necessary, to assure that the amounts shown on the certificate of actual 
cost do not exceed the amounts represented on the cost breakdown. Any 
funds remaining as a result of hard cost savings will be applied to the 
account as an extra payment or used for eligible loan purposes approved 
by FmHA or its successor agency under Public Law 103-354 as long as the 
improvements are genuinely needed and will enhance marketability of the 
project. All increases or decreases of 15 percent or more in line item 
costs will require documentation as to the reason for the increases or 
decreases. The State Director may require documentation for increases or 
decreases of less than 15 percent, if he/she determines it necessary. 
This information will be required with the cost certification.
    (C) Subcontracting development work.
    (1) Owner-builders will not be allowed to obtain a profit and 
overhead unless they are performing actual construction. ``Actual 
construction'' means ``work'' as defined in AIA documents: ``* * * 
labor, materials, equipment, and services provided by the contractor to 
fulfill the contractor's obligations.''

[[Page 120]]

Under this definition, owner-builders who choose to subcontract out 
construction of the project to another contractor will not obtain a 
builder's fee (general overhead and profit) when:
    (i) More than 50 percent of the total cost of the building 
construction is subcontracted to one subcontractor, material supplier, 
or equipment lessor, and/or
    (ii) Seventy-five percent or more with three or fewer 
subcontractors, material suppliers, and/or equipment lessors.
    (2) Note: If two or more subcontractors have common ownership, they 
are considered as one subcontractor.
    (3) How to apply rule:
    (i) The 50 percent rule will apply when division of the amount of 
the largest subcontract by the total amount of the building cost results 
in more than 50 percent.
    (ii) The 75 percent rule will apply when division of the sum of the 
amounts of the three largest subcontracts by the total building cost 
results in 75 percent or more.
    (D) Qualified contracting entities. Contractors, subcontractors, 
material suppliers, and any other individual or organization sharing an 
identity of interest and providing materials or services for the project 
must certify that it is a viable, ongoing trade or business qualified 
and properly licensed to undertake the work for which it intends to 
contract. Form FmHA or its successor agency under Public Law 103-354 
1944-31 will be prepared and executed by the contracting entities. The 
form provides notification to the entities of the penalty, under law, 
for erroneously certifying to the statements contained therein. 
Debarment actions will be instituted against entities who fail to 
disclose an identity of interest in accordance with the provisions of 
FmHA or its successor agency under Public Law 103-354 Instruction 1940-M 
(available in any FmHA or its successor agency under Public Law 103-354 
office).
    (ix) Requests for payment for work performed by the owner-builder 
method, shall be permitted to the FmHA or its successor agency under 
Public Law 103-354 District Director for review and approval prior to 
each advance of funds in order to insure that funds are used for 
authorized purposes. Requests for payment shall be made on Form FmHA or 
its successor agency under Public Law 103-354 1924-18 or other 
professionally recognized form containing the following certification to 
FmHA or its successor agency under Public Law 103-354:

    The undersigned certifies that the work has been carefully inspected 
and to the best of their knowledge and belief, the quantities shown in 
this estimate are correct and the work has been performed in accordance 
with the contract documents.
________________________________________________________________________
(Name of Architect)

By:_____________________________________________________________________

________________________________________________________________________
    (Title        (Date)

Approved by Owner's Representative: By:_________________________________

________________________________________________________________________
    (Title)

Accepted by FmHA or its successor agency under Public Law 103-354 
Representative: By:_____________________________________________________
________________________________________________________________________
    (Title)

    The review and acceptance of partial payment estimates by FmHA or 
its successor agency under Public Law 103-354 does not attest to the 
correctness of the quantities shown or that the work has been performed 
in accordance with the plans and specifications.

    (A) If interim financing is available at reasonable rates and terms 
for the construction period, such financing shall be obtained. Exhibit B 
of subpart E of part 1944 of this chapter shall be used to inform the 
interim lender that FmHA or its successor agency under Public Law 103-
354 will not close its loan until the project is complete, ready for 
occupancy, evidence is furnished indicating that all bills have been 
paid for work completed on the project, all inspections have been 
completed and all required approvals have been obtained from any 
governmental authorities having jurisdiction over the project. Upon 
presentation of proper partial payment estimates containing an estimate 
of the value of work in place which has been prepared and executed by 
the owner-builder, certified by the applicant's architect, and accepted 
by FmHA or its successor agency under Public Law 103-354, the

[[Page 121]]

interim lender may advance construction funds in accordance with the 
provisions of this section. It is suggested that the partial payment not 
exceed 90 percent of the value of work in place and material suitably 
stored on site.
    (B) If interim financing is not available, partial payments not to 
exceed 90 percent of the value of work in place and materials suitably 
stored on site may be made to the owner-builder for that portion of the 
estimated cost of development guaranteed by a letter of credit or 
deposits meeting the requirements of Sec. 1924.6(a)(3)(iii) (A), (B) or 
(C) of this subpart. Partial payments may not exceed 60 percent of the 
value of work in place in all other cases. The determination of the 
value of work in place will be based upon an application for payment 
containing an estimate of the value of work in place which has been 
prepared and executed by the owner-builder, certified by the borrower's 
architect, and accepted by FmHA or its successor agency under Public Law 
103-354. Prior to receiving the first partial payment, the owner-builder 
must submit a schedule of prices or values of the various trades or 
phases of the work aggregating the total development cost of the project 
as required in Sec. 1924.13(e)(2)(i) (G) and (H) of this subpart. Each 
application for payment must be based upon this schedule, and show the 
total amount owed and paid to date for materials and labor procured in 
connection with the project. With each application for payment, the 
owner-builder must also submit evidence showing how the requested 
partial payment is to be applied, evidence showing that previous partial 
payments were properly applied, and a signed statement from the 
applicant's attorney, title insurance company, or local official in 
charge of recording documents certifying that the public records have 
been searched and that there are no liens of record. When the District 
Director has reason to believe that partial payments may not be applied 
properly, checks will be made payable to persons who furnish materials 
and labor for eligible purposes in connection with the project.
    (x) Under no circumstances shall funds be released for final payment 
or to pay any items of the builder's profit until the project is 100 
percent complete, ready for occupancy, and the owner-builder has 
completed and properly executed Form FmHA or its successor agency under 
Public Law 103-354 1924-13 or complied with the cost certification 
procedures of Sec. 1924.13(e)(2)(viii) of this subpart.

[52 FR 8002, Mar. 13, 1987; 52 FR 26139, July 13, 1987, as amended at 53 
FR 2155, Jan. 26, 1988; 59 FR 6882, Feb. 14, 1994; 61 FR 56116, Oct. 31, 
1996]



Secs. 1924.14-1924.48  [Reserved]



Sec. 1924.49  State supplements.

    State Supplements or policies will not be issued or adopted to 
either supplement or set requirements different from those of this 
subpart, unless specifically authorized in this subpart, without prior 
written approval of the National Office.



Sec. 1924.50  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0575-0042. Public 
reporting burden for this collection of information is estimated to vary 
from 5 minutes to 4 hours per response, with an average of 37 minutes 
per response, including time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Send comments 
regarding this burden estimate or any other aspect of this collection of 
information, including suggestions for reducing this burden, to U.S. 
Department of Agriculture, Clearance Officer, OIRM, AG Box 7630, 
Washington, DC 20250; and to the Office of Management and Budget, 
Paperwork Reduction Project (OMB 0575-0042), Washington, DC 
20503.

[59 FR 6885, Feb. 14, 1994]

[[Page 122]]

  Exhibit A to Subpart A of Part 1924--Estimated Breakdown of Dwelling 
                  Costs for Estimating Partial Payments

                              [In percent]
------------------------------------------------------------------------
                                              With      With
                                             slab on    crawl     With
                                              grade     space   basement
------------------------------------------------------------------------
1. Excavation.............................         3         5         6
2. Footings, foundations columns..........         8         8        11
3. Floor slab or framing..................         6         4         4
4. Subflooring............................         0         1         1
5. Wall framing, sheathing................         7         7         6
6. Roof and ceiling framing, sheathing....         6         6         5
7. Roofing................................         5         5         4
8. Siding, exterior trim, porches.........         7         7         6
9. Windows and exterior doors.............         9         9         8
10. Plumbing--roughed in..................         3         2         3
11. Sewage disposal.......................         1         1         1
12. Heating--roughed in...................         1         1         1
13. Electrical--roughed in................         2         2         2
14. Insulation............................         2         2         2
15. Dry wall or plaster...................         8         8         7
16. Basement or porch floor, steps........         1         1         6
17. Heating--finished.....................         3         3         3
18. Flooring..............................         6         6         5
19. Interior carpentry, trim, doors.......         6         6         5
20. Cabinets and counter tops.............         1         1         1
21. Interior painting.....................         4         4         3
22. Exterior painting.....................         1         1         1
23. Plumbing--complete fixtures...........         4         4         3
24. Electrical--complete fixtures.........         1         1         1
25. Finish hardware.......................         1         1         1
26. Gutters and downspouts................         1         1         1
27. Grading, paving, landscaping..........         3         3         3
                                           -----------------------------
      Total...............................       100       100       100
------------------------------------------------------------------------

Exhibit B to Subpart A of Part 1924--Requirements for Modular/Panelized 
                              Housing Units

    For the benefit of FmHA or its successor agency under Public Law 
103-354 this exhibit prescribes evaluation, acceptance, inspection and 
certification procedures formodular/panelized housing units proposed for 
use in Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 Rural Housing programs. It applies to proposed 
development packages provided either under a contract between an FmHA or 
its successor agency under Public Law 103-354 borrower and a single 
contractor or under a conditional commitment. This exhibit also 
describes the use of background information available through the 
Department of Housing and Urban Development (HUD) for analysis of 
manufactured products. This exhibit also applies to the evaluation of 
manufactured farm service buildings in paragraph XI, below. For the 
purpose of this exhibit, County Supervisor and County Office also mean 
District Director and District Office, respectively.
    I. Applicable Standards and Manuals.
    A. The HUD Handbook 4950.1, Technical Suitability of Products 
Program Technical and Processing Procedures, must be followed by housing 
manufacturers to obtain acceptance of their products. Acceptance 
documents issued by HUD include: Structural Engineering Bulletins (SEB) 
on a national basis, Area Letters of Acceptance (ALA) which when 
accepted by all Area HUD Offices in a HUD region will, in essence, 
become Regional Letters of Acceptance (RLA), Truss Connector Bulletins 
(TCB): and, Mechanical Engineering Bulletins (MEB). These documents as 
well as the Use of Material Bulletins (UM) and Materials Release 
Bulletins (MR) are addendums to the HUD Minimum Property Standards 
(MPS), Under handbook guidelines, HUD also examines state agency 
regulations concerning design, construction and labeling of modular/
panelized housing units and designates those states having procedures 
acceptable for use under HUD programs. Modular/panelized housing 
produced in these states is called Category III and is considered 
technically suitable for use without further structural analysis.
    B. All State FmHA or its successor agency under Public Law 103-354 
Offices should maintain a close working relationship with each HUD 
office in their jurisdiction to assure coordination. Any deviations in 
structure, materials or design from HUD acceptance documents must comply 
with one of the other applicable development standards.
    II. Modular Housing Units that Require Factory Inspections.
    Only those types which cannot be completely inspected on site are 
required to obtain acceptance from HUD. Those that receive acceptance 
will be periodically factory inspected by HUD or HUD's designated 
agency, usually about every 6 months.
    III. Panelized Housing Units that Do Not Require Factory 
Inspections.
    A. Housing completely assembled on the building site does not 
require HUD acceptance. This includes housing that is manufactured but 
is assembled on the site such as: Precut pieces, log wall houses, 
trussed roof rafters or floor trusses; open panel walls, and other types 
that can be completely inspected on site.
    B. Housing that is assembled in local materials dealers' yards for 
moving to local sites and to be purchased by an FmHA or its successor 
agency under Public Law 103-354 applicant, will be inspected during 
construction in the yard by the local FmHA or its successor agency under 
Public Law 103-354 County representative.These units must be

[[Page 123]]

constructed according to the applicable development standard and not 
transported out of the local FmHA or its successor agency under Public 
Law 103-354 County Office jurisdiction. The inspection must be recorded 
on Form FmHA or its successor agency under Public Law 103-354 1924-12, 
``Inspection Report.''
    IV. Manufacturer's Actions Required for Submissions to FmHA or its 
successor agency under Public Law 103-354 are listed in attachment 1 to 
this exhibit B.
    V. State FmHA or its successor agency under Public Law 103-354 
Office Actions when Manufacturing Facilities are in its Jurisdiction. 
The State Office, upon receipt of manufacturer's submission, must:
    A. Determine that the unit structural system has been accepted by 
HUD as appropriate under HUD Handbook 4950.1 requirements.
    B. Review the thermal characteristics and approach of the 
calculations to determine actions to be taken in compliance with 
paragraph IV C of exhibit D of this subpart.
    C. Review the proposal for compliance with Sec. 1924.5(d)(1) of this 
subpart.
    D. Determine that the prerequisites for consideration of acceptance 
by FmHA or its successor agency under Public Law 103-354 are met. The 
prerequisites include all of the following:
    1. A current acceptance document from HUD (SEB, RLA, ALA), except 
for Category III housing (modular/panelized housing that does not have 
to have a Structural Engineering Bulletin as designated by HUD). In 
Category III states, the state government requirements for manufactured 
housing must be followed.
    2. A current HUD Factory Inspection Report, Form No. 2051m, or in 
the case of Category III housing, a copy of the inspection report from 
the state government or accepted third party performing the factory 
inspection. Each report must be made by HUD or a HUD authorized agency, 
and must be no older than 6 months.
    3. A letter from the manufacturer requesting a review for 
acceptance. Enclosed with the letter shall be all the information listed 
in attachment 1 to this exhibit B.
    E. Issue acceptance letters to the manufacturer stating the 
conditions of acceptance in the format of attachment 2 to this exhibit 
B. The letter shall have an attachment listing all models accepted in 
the format of attachment 3 to this exhibit B. A copy of the acceptance 
letter and list of models shall be sent to each County Office in the 
state and, when requested by the manufacturer, to each other FmHA or its 
successor agency under Public Law 103-354 State Office in which the 
product is to be marketed.
    F. After initial review of a submission, maintain a master file of 
accepted manufacturers and models and review the file twice yearly to 
determine the currency of the factory inspection reports and HUD or 
state government acceptance documents.
    G. Notify manufacturers of overdue factory inspection reports, for 
acceptance of documents review and updating, using the format of 
attachment 4 to this exhibit B. Accompanying the notification will be a 
temporary acceptance sheet (Attachment 3 to this exhibit B) indicating 
to the manufacturer that the company models have temporary acceptance 
for 60 days. If the manufacturer provides evidence that a review is 
being processed by HUD, a maximum of an additional 90 days may be 
granted. Otherwise, the acceptance shall terminate on the last extension 
date and it will be necessary for the manufacturer to resubmit as if for 
initial acceptance.
    H. Distribute a list of added models, deleted models, or notice of 
deletion of any manufacturer's product to the County Offices and other 
State FmHA or its successor agency under Public Law 103-354 Offices as 
necessary.
    I. Issue an initial supply of Manufacturer's and Builder's 
Certification forms (Attachment 5 to this exhibit B) to each existing 
and newly accepted manufacturer. Manufacturers are to duplicate this 
form as necessary in their market areas.
    J. Resolve any problems with the manufacturer, as reported by the 
County Office. Action may include coordination, FmHA or its successor 
agency under Public Law 103-354 plant inspections or cancellation of 
acceptance letters when problems persist.
    VI. County Office Actions:
    A. When an application is received involving any of the 
manufacturer's products on the accepted list, the County Office FmHA or 
its successor agency under Public Law 103-354 authorized personnel will:
    1. Review the drawings and description of materials described in 
paragraphs A and B of attachment 1 to this exhibit B. The floor plans 
and elevations must be identifiable with the model listed in the 
accepted list issued by the State Office.
    2. Require the builder/dealer or manufacturer to provide any 
drawings necessary to adapt the house to the site conditions where the 
house will be located.
    3. Require site plan drawing such as those illustrated in 
attachments 1 and 2 to exhibit C of this subpart (available in any FmHA 
or its successor agency under Public Law 103-354 office).
    4. Inspect and identify the model delivered against the 
manufacturer's certification and the accepted drawings and description 
of materials before the unit has been set on the foundation.
    5. Require the builder/dealer to certify that the work for which the 
builder/dealer is responsible has been erected in compliance with the 
applicable development standard.

[[Page 124]]

This certification will be completed on a copy of attachment 5 to this 
exhibit B, and filed in County Office case file.
    6. Observe any noncompliance with the applicable development 
standard or with paragraphs IV and V of this exhibit B. In this respect:
    a. Minor noncompliance will be resolved by the manufacturer through 
the builder/dealer. In cases where there is no builder/dealer, the 
County Office may resolve such issues with the manufacturer directly.
    b. Noncompliance that cannot be resolved at the County Office level 
will be reported to the State Office.
    7. Inspect manufactured housing according to Sec. 1924.8(d) of this 
subpart.
    8. Be aware that the accepted list may include many models from 
which loan applicants may choose. No changes from accepted model designs 
are permitted. The model selected by an applicant should be appropriate 
to the needs of that particular family in accordance with subpart A of 
part 1944 of this chapter.
    VII. Noncompliance Issues.
    A. When minor issues are noted, the County Office will attempt to 
resolve them as described above. If they cannot be resolved locally, 
they will be referred to the State Office. When any issues cannot be 
resolved at State Office level, the National Office Program Support 
Staff (PSS) will be contacted for guidance.
    B. The National Office PSS coordinating with HUD, will take the 
appropriate actions to resolve the issues reported.
    C. Manufacturers and builder/dealers must be aware that if the FmHA 
or its successor agency under Public Law 103-354 inspector finds any of 
the following conditions, the inspector may refuse to accept the 
construction until corrections have been made:
    1. Evidence of noncompliance with any option of the method described 
in the HUD--SEB, RLA, or ALA.
    2. Faulty shop fabrication, including surface defects.
    3. Damage to shop fabricated items or materials due to 
transportation, improper storage, handling or assembly operation.
    4. Unsatisfactory field or site workmanship.
    VIII. Actions by Other State Offices. When a State Office receives a 
copy of the accepted list from the State Office in which a manufacturing 
plant is located, it will:
    A. Maintain a file, by manufacturer, of each accepted list of 
models.
    B. Provide copies of the accepted list of models to each County 
Office in the State.
    C. Request a copy of the drawings, description of materials, and 
thermal calculations to determine compliance with the thermal 
requirements for the county in which the house is to be located 
according to exhibit D of this subpart.
    D. Check to see that County Offices within the state will act as 
prescribed in paragraph VI of this exhibit B.
    E. When two or more State Offices have different interpretations of 
the acceptability of a particular model, there must be an agreement 
between the states so that they will have the same requirements. If the 
states cannot agree, the National Office PSS will be consulted for 
guidance.
    IX. Subsequent Review.
    FmHA or its successor agency under Public Law 103-354 will make 
periodic reviews of houses, both site-built and houses manufactured 
offsite, to determine acceptability of the finished product. If, in the 
judgment of the FmHA or its successor agency under Public Law 103-354, 
the product has failed to perform satisfactorily, acceptance may be 
withdrawn. The State Director will notify the manufacturer and/or the 
builder/dealer of the reasons for the withdrawal no later than the time 
of withdrawal. Negotiations for corrections will be carried out by the 
County Office with the assistance of the State Office or National 
Office, as necessary.
    X. Materials and Products Acceptance--Material Release Bulletins, 
Use of Materials Bulletins, Manufacturer's Instructions.
    A. The Materials Release (MR) and Use of Materials Bulletins (UM) 
provide for the national acceptance of specific nonstandard materials 
and products not covered in the current HUD MPS.
    B. When contractors or builders intend to use products or materials 
not listed as approved in the MPS, the FmHA or its successor agency 
under Public Law 103-354 personnel reviewing or concerned with the 
approval of construction in which the product is to be used, will 
require the contractor or builder to furnish a Materials Release 
Bulletin or Use of Materials Bulletin on the materials or products. If 
the product has been accepted, the supplier should be able to obtain the 
bulletin for the contractor or builder from the manufacturer. These 
bulletins describe the products or materials limitations to use, method 
of installing or applying, approved type of fasteners, if used, etc. and 
will provide the contractor with instructions as to proper installation 
or application.
    C. When FmHA or its successor agency under Public Law 103-354 
personnel are unfamiliar with any materials or products which have been 
accepted in the MPS, they will request the contractor or builder to 
furnish the manufacturer's instructions to assure that the materials or 
products are properly installed or applied. Any questions on any product 
that cannot be resolved in the County Office should be referred to the 
State Office. When the question cannot be resolved at the State Office 
level, the National Office PSS should be consulted for guidance.
    XI. Manufactured Farm Service Buildings.

[[Page 125]]

    A. When a loan application is received that involves a manufactured 
building or special equipment that cannot be completely inspected on the 
site, the local State Land Grant University recommendations should be 
requested.
    B. When the County Office questions the advisability of making a 
loan on a manufactured building, the State Office should also be 
consulted.
    C. The State Office should review and make recommendations to the 
County Office. If doubt still exists, the National Office PSS should be 
consulted for guidance.

 Attachment 1--Required Information for Acceptance of Modular/Panelized 
                              Housing Units

    The manufacturer or sponsor of modular/panelized housing units 
wishing to participate in the Farmers Home Administration (FmHA) or its 
successor agency under Public Law 103-354 Rural Housing programs shall 
submit to the FmHA or its successor agency under Public Law 103-354 
State Director having jurisdiction over the state in which the proposed 
housing is to be manufactured, two complete sets of the information 
listed below for evaluation. Submissions not including all the 
information requested will be returned.
    A. Statements:
    1. Name and location of organization, including titles and names of 
its principal officers.
    2. A brief description of plant facilities.
    3. Extent of intended market distribution, including a list of any 
other states in which units will be marketed.
    4. The method of quality control during site installation.
    5. A copy of the applicable current HUD Structural Engineering 
Bulletin (SEB), Regional Letter of Acceptance (RLA), or Area Letter of 
Acceptance (ALA).
    6. A current factory inspection report made within 6 months by HUD 
or HUD authorized agency.
    7. Name and address of any third party inspection agency.
    8. Location of nearest assembled product for inspection.
    9. Field manuals for site installation and/or set-up procedures.
    10. Specifications or descriptions of materials using either Form 
FmHA or its successor agency under Public Law 103-354 1924-2, (HUD-FHA 
Form 2005), ``Description of Materials,'' including sizes, species and 
grade of all building and finishing materials. All blanks should be 
filled and additional sheets may be attached as well as equipment 
manufacturer's brochures. Use an asterisk (*) to denote all items of 
onsite construction that will be provided by the builder-dealer. The 
builder-dealer must complete a form for the builder-dealer's portion of 
the work. Use N/A in any blank which is not applicable.
    11. Names and addresses of other public and private agencies which 
have rendered or been asked to render a technical suitability or 
acceptance determination with respect to the products or structural 
methods employed.
    12. Written certification that construction drawings and 
specifications conform with the applicable development standard.
    13. Any other pertinent information.
    14. An index of all documents submitted.
    B. Working Drawings. For emphasis as to the details required for 
modular/panelized housing proposals, the following items are listed in 
addition to and in more detail than the requirements in exhibit C of 
this subpart. In some cases, the drawing presentation sheets may be 
required to be reduced to 200 mm by 266 mm (8x10\1/2\ inches) sheet 
size:
    1. Foundation and/or Basement Plan. This plan shall include 
anchorage details, exterior and interior dimensions, typical footings, 
wall thickness, pilaster sizes and locations, column or pier sizes and 
locations and girders required to support the structures. Show location 
of all equipment (furnace, water heater, laundry tubs, sump, etc.) floor 
drains, electrical outlets, electrical entrance panels, and all doors 
and windows or crawl space vents with all sizes indicated.
    2. Floor Plans of all levels. Show square footage of each habitable 
room with square footage of each area of natural light and ventilation. 
In addition, a design sketch scaled properly to illustrate a typical 
furniture arrangement for all habitable levels is required to indicate 
intended occupancy functions of the design. A window and door schedule 
should also be provided indicating glazed size, sash size, and thermal 
conductance of each type.
    3. All exterior elevations including opening and sizes; wall finish 
materials, flashing, finish grades intended, depth of footings when 
known, finish floor, ceiling heights, roof slope, location of 
downspouts, gutters, vents for both structural spaces and for equipment. 
Indicate construction joint locations and details of connections between 
sections, modules or components.
    4. Building cross sections showing size and spaces of all framing 
members from lowest member (bottom of footing) to highest point of roof 
(ridge) plus;
    (a) Type of material and method of application of all covering 
materials, such as subflooring, combination subflooring and 
underlayment, sheathing, interior and exterior finishes;
    (b) Complete details including computations of trussed rafter 
systems with the architect/engineer's stamp of those responsible for the 
design.
    (c) Details of insulation and vapor barrier installation and attic 
ventilation. If the thermal characteristics to be provided are

[[Page 126]]

determined according to optional method for overall structure 
performance allowed in exhibit D of this subpart, the submission and 
complete engineering calculations with all details of construction shall 
be sent to Administrator, Attn. PSS, FmHA or its successor agency under 
Public Law 103-354 Washington, DC 20250, for analysis as prescribed in 
paragraph IV C of exhibit D of this subpart.
    (d) Special details as necessary to show any special features of 
construction, including method of fabricating, erection, joining, and 
finishing of all elements; and
    (e) Details and sections of stairways including all critical 
dimensions, such as, riser, run and headroom.
    5. Interior elevations of kitchen cabinets and bathroom elevations 
with schedule of all shelf, counter-top and drawer footage. Indicate 
whether kitchen cabinets are to be custom made for each model or made 
for any model by a cabinet manufacturing company.
    6. Plumbing schematics, including pipe materials, sizes and plumbing 
code compliance.
    7. Heating plan, including heat loss of each room, is needed for 
heating systems, sizings and capacities, forced air, electric baseboard, 
or electric space heaters and, if applicable, heat gain. For forced air 
systems, include supply and return duct layout and location of 
appropriate diffusers.
    8. Electrical plan, including circuit chart or diagram.
    9. Any other pertinent facts or drawings that will better explain 
why and how certain unusual materials or structural methods are 
employed.

                              Attachment 2

John Dough Manufacturing Company,
3444 Residence Avenue,
Elkton, Indiana 00051.

    Dear Sirs: Athough the documents submitted to this office have only 
received a cursory review, they appear to be in substantial compliance 
to qualify your firm for the type of acceptance indicated on the 
attached list.
    The acceptance being issued is subject to this letter of conditions, 
compliance with HUD Handbook 4950.1 Technical Suitability of Products 
Program Technical and Processing Procedures, compliance with Farmer Home 
Administration (FmHA) or its successor agency under Public Law 103-354) 
Thermal Performance Construction Standards, and compliance with the 
conditions set forth in the HUD acceptance document, if applicable, 
whose number appears on the acceptance.
    The manufacturer and the authorized builder-dealer bear the 
responsibility of complying with the above, the exhibits submitted and 
the applicable development standards.
    The manufacturer and/or builder-dealer also shall:
    1. Provide positive identification of the modular unit by model, 
date of manufacture and factory in which the unit was manufactured.
    2. Furnish with each home to be financed by FmHA or its successor 
agency under Public Law 103-354 in------(State)------, a written 
certificate (Attachment 5 to this exhibit B) endorsed by the builder-
dealer certifying that all requirements have been satisfied.
    3. Furnish the local FmHA or its successor agency under Public Law 
103-354 County Supervisor with a complete set of drawings including site 
plans, description of materials, structural engineering bulletins when 
applicable in the state, and documentation relating to the manufacture, 
transportation, erection, and installation for each model of modular/
panelized housing to be financed in the county. Electrical, plumbing and 
heating plans must be furnished for each model in addition to the basic 
drawings. Floor plans and elevation drawings may vary from those listed 
in attachment 1 of exhibit B to FmHA or its successor agency under 
Public Law 103-354 Instruction 1924-A to reflect each of the 
manufacturer's models provided they are in compliance with the 
applicable development standard and the FmHA or its successor agency 
under Public Law 103-354 Thermal Performance Construction Standards and 
provided they have been accepted and listed in this state's approval of 
manufactured structures. No field alterations to the accepted models 
will be allowed.
    4. Furnish, when required by the County Supervisor, foundation 
drawings (including special foundation design considerations when the 
unit is to be erected in seismic zones 1, 2 or 3) adapting the modular 
home to any unusual site conditions needing information additional to 
that furnished by the standard drawings.
    5. Furnish the County Office with a copy of inspection reports of 
the manufacturing facilities immediately after the inspection reports 
have been completed.
    6. Allow FmHA or its successor agency under Public Law 103-354 
personnel to inspect the manufacturing facilities at any time and 
furnish all FmHA or its successor agency under Public Law 103-354 State 
Offices, where acceptance has been obtained, with a copy of any FmHA or 
its successor agency under Public Law 103-354 inspection reports 
immediately after the inspection reports have been completed.
    7. In the event there are major changes to the submitted drawings, 
obtain approval under the HUD Technical Suitability of Products Program 
and submit verification of this approval to the County Office for 
listing on the state's accepted list. Any modular

[[Page 127]]

home shipped with major changes incorporated, without such changes on 
file at the County Office may be rejected.

(Add state and local requirements appropriate to this letter of 
conditions.)
    This acceptance may be subject to corrective action when 
deficiencies are noted in the product, field inspections, manufacturing 
facilities, or when there is noncompliance with the provisions of the 
HUD Technical Suitability of Products Program.
    The inclusion of these models on the accepted list is based only on 
the material and structural aspects of the manufactured units. Final 
determination of acceptability rests with FmHA or its successor agency 
under Public Law 103-354 personnel. Other factors relating to the 
property in its entirety such as appraisal, location, sustained market 
acceptance, architectural planning and appeal, thermal qualities, 
mechanical and electrical equipment, etc., must be considered in the 
final determination.
    Your cooperation in this acceptance program is appreciated.
        Sincerely,

State Director

                              Attachment 3

Date ------ File No. ------

              Acceptance of Modular/Panelized Housing Units

                     (Based on HUD Handbook 4950.1)

Manufacturer:

------  Acceptance Document ------
------  Type of Acceptance:
------  ---- Regular
------  ---- Temporary, Expires ------
Plant Locations:________________________________________________________
Date of Latest Plans
Reviewed________________________________________________________________
Date of Latest Factory
Inspection______________________________________________________________
Acceptance Document Review
Date____________________________________________________________________

 FmHA or its successor agency under Public Law 103-354 Instruction 1924-
                              A, exhibit D

               Thermal Performance Construction Standards

State Office Review

(Exh. D, IV, C, 1, a or b)
National Office Review

(Exh. D, IV, C, 2)

Maximum Winter Degree Days for
State ------ Walls R ------
Glazing/Gross Wall Area Ratio ------%
Ceilings R ------
Glazing ------ Pane(s)
Floor R ------
Glazing ------ Pane(s)
Insulated Door ------
Wood and Storm ------
Insulated Door ------
Wood and Storm ------

Models Accepted:

                              Attachment 4

John Dough Manufacturing Company,
3444 Residence Avenue,
Elktown, Indiana 00051.

    Dear Sirs: As set forth in acceptance letters issued by this office, 
acceptance of modular/panelized homes in this state is based on HUD's 
Technical Suitability of Products Program and the conditions stated in 
the acceptance letter. Your file has been reviewed and the following has 
been noted.

----An inspection report of your manufacturing facilities is overdue. 
          Inspections are required twice yearly. The last inspection 
          report on file at this office is dated ------.
----Your Structural Engineering Bulletin No. ---- dated ---- has not 
          been reviewed by HUD. Reviews are generally required every 
          three years. Temporary acceptance will be considered when you 
          provide evidence that the review documents have been submitted 
          to HUD.
----The drawings being used for the construction of your homes are not 
          listed in your Structural Engineering Bulletins. Drawings used 
          in the field should be those upon which the Structural 
          Engineering Bulletin was issued.
----There have been ---- revisions to the development standards since --
          ----, the date of the last drawings we have on file for your 
          homes. It is recommended that you review the revisions to 
          ascertain whether your drawings need to be updated.

    Please submit a written response and appropriate documents for the 
above items within ---- days, or your product will be removed from the 
accepted list until your firm can again qualify. If you have any 
problems furnishing the above within the time stated, please contact 
this office.
    We look forward to receiving the materials indicated so that your 
firm's listing may be continued.
        Sincerely,

State Director

                              Attachment 5

                      Certification by Manufacturer

Delivery location of structure

for component___________________________________________________________
________________________________________________________________________

This is to certify that
Model: ------------,
Serial  ------------,
manufactured ------

[[Page 128]]

(date) ------, 19 -- in
---- (location) ------
and being sold to ------
(name of ------------
builder-dealer or borrower) has been manufactured in accordance with 
drawings and specifications on file in the FmHA or its successor agency 
under Public Law 103-354 State Office and that the construction complies 
with applicable development standards, except as modified by HUD 
Acceptance Document (SEB, RLA, ALA,)
NO. ------------,
dated --------,
and in compliance with the FmHA or its successor agency under Public Law 
103-354 Thermal Performance Construction Standards.
________________________________________________________________________

Date
________________________________________________________________________

Signature of Authorized Official

________________________________________________________________________
Title

                     Certification by Builder-Dealer

------ (Name of
builder-dealer) ------
certifies that the foundation and other on-site work has been 
constructed in accordance with the drawings and specifications and the 
above structure or component has been erected, installed or applied in 
compliance with the applicable development standards.
    It is understood that the manufacturer's certification does not 
relieve the builder/dealer of responsibility under the terms of the 
builder's warranty required by the National Housing Act.
________________________________________________________________________
Date
________________________________________________________________________
Signature of Authorized Official
________________________________________________________________________
Title

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Exhibit B to 
Subpart A to Part 1924 was amended in paragraph VI.A.8. by revising the 
words ``subpart A of part 1944 of this chapter'' to read ``7 CFR part 
3550'' effective January 23, 2003.

      Exhibit C to Subpart A of Part 1924--Guide for Drawings and 
                             Specifications

    This exhibit applies to all new buildings to be constructed, 
including all single family housing and related facilities and, as 
applicable, farm housing and farm service buildings.

                               I. General

    The documents recommended in this exhibit correspond with the list 
of exhibits in Chapter 3 of the Department of Housing and Urban 
Development (HUD) ``Architectural Handbook for Building Single-Family 
Dwellings'' No. 4145.2. This exhibit may be used as a public handout and 
shall be used as a guide for drawings and specifications to be submitted 
in support of any type of application involving construction of major 
new buildings or extensive rehabilitation, alterations or additions to 
existing buildings. Descriptions of work for minor alterations or 
repairs need pertain only to work to be done and may be in narrative 
form when acceptable to the County Supervisor. Complete and accurate 
drawings and specifications are necessary:
    A. To determine the acceptability of the proposed development,
    B. To determine compliance with the applicable standards and codes,
    C. To prepare a cost estimate, and
    D. To provide a basis for inspections and the builder's warranty.

                  II. Drawings for a Specific Structure

    Drawings for individual single dwellings shall provide at least the 
following:
    A. Plot Plan. Refer to Example Plot Plan No. 1, attachment 1 to this 
exhibit C (available in any FmHA or its successor agency under Public 
Law 103-354 office). Ratio: 1:240 (1 = 20[foot]) (at scale, 
1 = 20[foot] or \1/16\ = 1[foot] 0 
minimum):
    1. Lot and block number.
    2. Dimensions of plot and north point.
    3. Dimensions of front, rear and side yards.
    4. Location and dimensions of garage, carport and other accessory 
buildings.
    5. Location and sizes of walks, driveways and approaches.
    6. Location and sizes of steps, terraces, porches, fences and 
retaining walls.
    7. Location and dimensions of easements and established setback 
requirements, if any.
    8. Elevations at the following points: (a) first floor of dwelling 
and floor of garage, carport and other accessory building; (b) finish 
curb or crown of street at points of extension of lot lines; (c) finish 
grade elevation at each principal corner of structure; (d) finish grade 
at bottom of drainage swales at extension of each side of structure as 
feasible.
    9. The following additional elevations, as applicable, if the 
topography of the site or the design of the structure is such that 
special grading, drainage or foundations may be necessary. Examples are 
irregular or steeply sloping sites, filled areas on sites, or multi-
level structure designs; (a) finish and existing grade elevations at 
each corner of the plot; (b) existing and finish grade at each principal 
corner of dwelling; (c) finish grade at both sides of abrupt changes of 
grade such as retaining walls, slopes, etc.; (d) other elevations that 
may be necessary to show grading and drainage.
    10. Indication of type and approximate location of drainage swales.

[[Page 129]]

    11. When an individual water supply and/or sewage system is 
proposed, drawings, specifications and other items prescribed in 
paragraph V of this exhibit.
    B. Floor Plans.
    1. Scale, 1:50 (\1/4\ = 1[foot] 0).
    2. Floor plan of each floor and basement, if any. Show typical 
furniture locations to suggest intended use of each habitable space.
    3. Plan of all attached terraces and porches, and of garage or 
carport.
    4. If dwelling is of crawl-space type, a separate foundation plan. 
Slab-type foundation may be shown on sections.
    5. Direction, size and spacing of all floor and ceiling framing 
members, girders, columns or piers.
    6. Location of all partitions and indication of door sizes, and 
direction of door swing.
    7. Location and size of all permanently installed construction and 
equipment such as kitchen cabinets, closets, storage shelving, plumbing 
fixtures, water heaters, etc. Details of kitchen cabinets may be on 
separate drawing.
    8. Location and symbols of all electrical equipment, including 
switches, outlets, fixtures, etc.
    9. Heating system on separate drawing, or when it may be shown 
clearly it may be part of the floor or basement plan showing: (a) layout 
of system; (b) location and size of ducts, piping, registers, radiators, 
etc.; (c) location of heating unit and room thermostat; (d) total 
calculated heat loss of dwelling including heat loss through all 
vertical surfaces, ceiling and floor. When a duct or piped distribution 
system is used, calculated heat loss of each heated space is required.
    10. Cooling system, on separate drawings or, as part of heating 
plan, floor or basement plan showing: (a) layout of system; (b) location 
and size of ducts, registers, compressors, coils, etc.; (c) heat gain 
calculations, including estimated heat gain for each space conditioned; 
(d) model number and Btu capacity of equipment or units in accordance 
with applicable Air Conditioning and Refrigeration Institute (ARI) or 
American Society of Refrigerating Engineers (ASRE) Standard; (e) Btu 
capacity and total kilowatt (KW) input at stated local design 
conditions; (f) if room or zone conditioners are used, provide location, 
size and installation details.
    C. Exterior Elevations.
    1. Scale, 1:50 (\1/4\ = 1[foot] 0). 
Elevations, other than main elevation, which contain no special details 
may be drawn at 1:100 (\1/8\ = 1[foot] 0).
    2. Front, rear and both side elevations, and elevations of any 
interior courts.
    3. Windows and doors--indicate size unless separately scheduled or 
shown on floor plan.
    4. Wall finish materials where more than one type is used.
    5. Depth of wall footings, foundations, or piers, if stepped or at 
more than one level.
    6. Finish floor lines.
    7. Finish grade lines at buildings.
    D. Details and Sections.
    1. Section through exterior wall showing all details of construction 
from footings to highest point of road. Where more than one type of wall 
material is used, show each type. Scale 1:25 (\3/8\ = 1[foot] 
0) minimum.
    2. Section through any portion of dwelling where rooms are situated 
at various levels or where finished attic is proposed, Scale, 1:50 (\1/
4\ = 1[foot] 0) minimum.
    3. Section through stair wells, landings, and stairs, including 
headroom clearances and surrounding framing. Scale, 1:50 (\1/
4\ = 1[foot] 0) minimum.
    4. Details of roof trusses, if proposed, including connections and 
stress or test data with seal of architect or engineer responsible. 
Scale of connections, 1:25 (\3/8\ = 1[foot] 0) 
minimum.
    5. Elevation and section through fireplace. Scale, 1:25 (\3/
8\ = 1[foot] 0) minimum.
    6. Elevations and section through kitchen cabinets, indicating 
shelving. Scale, 1:50 (\1/4\ = 1[foot] 0) minimum.
    7. Sections and details of all critical construction points, 
fastening systems, anchorage methods, special structural items or 
special millwork. Scale as necesaary to provide information, 1:25 (\3/
8\ = 1[foot] 0) minimum.

                III. Master Drawings for Group Structures

    Drawings for a group of structures (such as for several conditional 
commitments) may be submitted in lieu of drawings for each individual 
property when a number of applications are simultaneously submitted 
involving repetition of the same type structure.
    A. Master plot plan shall include the following:
    1. Scale which will provide the following information in a clear and 
legible manner.
    2. North point.
    3. Location and width of streets and rights-of-way.
    4. Location and dimensions of all easements.
    5. Dimensions of each lot.
    6. Location of each dwelling on lot with basic dimensions.
    7. Dimensions of front, rear and side yards.
    8. Location and dimensions of garage, carports and other accessory 
buildings.
    9. Identification of each lot by number and indication of basic plan 
and elevation type.
    10. Location of walks, driveways and other permanent improvements.
    B. Typical plot plan for each basic type dwelling may be submitted 
in lieu of fully detailing each lot on master plot plan, when topography 
and lot arrangements present no individual planning or construction 
problems.
    1. Information not shown on the typical plot plan shall be included 
on the master plot plan.

[[Page 130]]

    2. Typical plot plans shall not be used for corner lots, lots with 
irregular boundaries, lots involving pronounced topographic variations 
or other lots where individual detailing is necessary.
    3. Location of dwelling on typical lot and full dimensions.
    4. Location and dimensions of all typical improvements, such as 
garage, carport, accessory buildings, walks, drives, steps, porches, 
terraces, trees, shrubs, retaining walls, fences, etc.
    C. Grading may be shown on separate grading plan or on the master 
plot plan. Scale shall be sufficiently large to provide the following 
information in clear and legible manner:
    1. Contours of existing grade at intervals of not more than 1.524 m 
(5 feet). Intervals less the 1.524 m (5 feet) may be required when 
indicated by the character of the topography.
    2. Location of house and accessory buildings on each lot.
    3. Identification of each lot by number.
    4. Elevations in accordance with individual plot plan including 
bench mark and datum or, in lieu of finish grade elevations, contours of 
proposed finish grading may be submitted. Contour intervals selected 
shall be appropriate to the topography of the site.
    5. Lot grading shall be shown by indicating protective slopes and 
approximate location of drainage swales.
    6. Location of drainage outfall, if any drainage is not to a street.
    D. Floor plans, elevations, sections and details shall be submitted 
for each basic plan. Alternate elevations to basic plan may be shown at 
scale, 1:100 (\1/8\ = 1[foot] 0).

                           IV. Specifications

    Form FmHA or its successor agency under Public Law 103-354 1924-2, 
``Description of Materials,'' or other acceptable and comparable 
descriptions of all materials forms shall be submitted with the 
drawings. The forms shall be completed in accordance with the 
instructions on Form FmHA or its successor agency under Public Law 103-
354 1924-2 to describe the materials to be used in the construction.
    A. Form FmHA or its successor agency under Public Law 103-354 1924-2 
may be reproduced if size, format and printed text are identical to the 
current official form. When it is reproduced, the following deletions 
must be made:
    1. All lines indicating FmHA or its successor agency under Public 
Law 103-354 form numbers or other Government agency initials and/or 
numbers, and
    2. The United States Government Printing Office (GPO) imprint and 
reference number.
    B. The material identification shall be in sufficient detail to 
fully describe the material, size, grade and when applicable, 
manufacturer's model or identification numbers. When necessary, 
additional sheets must be attached as well as manufacturer's 
specification sheets for equipment and/or special materials, such as 
aluminum siding or carpeting.

         V. Individual Water Supply and Sewage Disposal Systems

    When an individual water and/or sewage disposal system is proposed, 
the following additional information must be submitted:
    A. Approval and recommendations of other authorities.
    1. A written opinion by the health authority having jurisdiction 
that the site is suitable and acceptable for the proposed systems(s) 
and,
    2. If available, a soils report from the local USDA-Soil 
Conservation Service and any recommendations they may have.
    3. Approval of appropriate environmental control authority.
    4. A signature of the health authority on the plot plan indicating 
approval of the design of the proposed system.
    B. Plot Plan. Refer to Example Plot Plan No. 2, attachment 2 to this 
exhibit C (available in any FmHA or its successor agency under Public 
Law 103-354 office).
    1. Location and size of septic tank, distribution box, absorption 
field or bed, seepage pits and other essential parts of the sewage 
disposal system and distance to all individual wells, open streams or 
drainageways.
    2. Location of well, service line and other essential parts of the 
water supply system and distance to other wells and/or sewage disposal 
systems.
    3. Exact location of individual systems (water or sewage) on 
adjacent properties and description of system, if available.
    C. Construction details of all component parts of individual water 
supply and sewage disposal systems shall clearly indicate material, 
equipment and construction. Extra sheets and drawings should be added as 
necessary to fully explain the proposed installation.

 Exhibit D to Subpart A of Part 1924--Thermal Performance Construction 
                                Standards

                               I. Purpose

    This exhibit prescribes thermal performance construction standards 
to be used in all housing loan and grant programs. These requirements 
shall supersede the thermal performance requirements in any of the 
development standards in Sec. 1924.4(h) of this subpart.

                               II. Policy

    All loan or grant applications involving new construction (except 
for new Single Family Housing (SFH)) and all applications

[[Page 131]]

for conditional commitments (except for new SFH) shall have drawings and 
specifications prepared to comply with paragraphs IV A or C and IV D of 
this exhibit. All new SFH construction shall have drawing and 
specifications prepared to comply with paragraph IV F of this exhibit. 
All existing dwellings to be acquired with FmHA or its successor agency 
under Public Law 103-354 loan funds shall be considered in accordance 
with paragraph IV B or C of this exhibit.

                            III. Definitions

    A. British thermal unit (Btu) means the quantity of heat required to 
raise the temperature of one pound (.4535 Kg.) of water by one degree 
Fahrenheit (F). For example, one Btu is the amount of heat needed to 
raise the temperature of one pound of water from 59 degrees F to 60 
degrees F.
    B. Glazing is the material set into a sash or door when used as a 
natural light source and/or for occupant's views of the outdoors.
    C. ``R'' value, thermal resistence, is a unit of measure of the 
ability to resist heat flow. The higher the R value, the higher the 
insulating ability.
    D. ``U'' value is the overall coefficient of heat transmission and 
is the combined thermal value of all the materials in a building 
section. U is the reciprocal of R. Thus U=1/R or R=1/U or 1/C where C is 
the thermal conductance and is the unit of measure of the rate of heat 
flow for the actual thickness of a material one square foot in area at a 
temperature of one degree Fahrenheit. The lower the U value, the higher 
the insulating ability.
    E. Winter degree-day is a unit based on temperature difference and 
time. For any one day, when the mean temperature is less than 65 degrees 
F (18.3 degrees Celsius), there are as many degree-days as the number of 
degrees difference between the mean temperature for the day and 65 
degrees F. The daily mean temperature is computed as half the total of 
the daily maximum and daily minimum temperatures.
    F. CABO Model Energy Code, 1992 Edition (MEC-92)--This code sets 
forth the minimum energy/thermal requirements for the design of new 
buildings and structures or portions thereof and additions to existing 
buildings. The MEC is maintained by the Council of American Building 
Officials (CABO).

                        IV. Minimum Requirements

    A. All multifamily dwellings to be constructed with FmHA or its 
successor agency under Public Law 103-354 loan and/or grant funds and 
all repair, remodeling, or renovation work performed on single family 
and multifamily dwellings with FmHA or its successor agency under Public 
Law 103-354 loan and/or grant funds shall be in conformance with the 
following, except as provided in paragraphs IV C 3 and IV D of this 
exhibit:

         New Construction--Maximum U Values for Ceiling, Wall And Floor Section of Various Construction
----------------------------------------------------------------------------------------------------------------
       Winter degree days \1\        Ceilings \2\   Walls   Floors \3\  Glazing \4\           Doors \5\
----------------------------------------------------------------------------------------------------------------
1000 or less.......................          0.05     0.08        0.08         1.13  ...........................
1001 to 2500.......................           .04      .07         .07          .69  ...........................
2501 to 4500.......................           .03      .05         .05          .69  Storm door if hollow core
                                                                                      door or if over 25% glass.
4501 to 6000.......................           .03      .05         .05          .47  Storm Door.
6001 or more.......................          .026      .05         .05          .47  Storm Door.
----------------------------------------------------------------------------------------------------------------
Note.--U values are not adjusted for framing. Values calculated for components may be rounded. For example, a
  total R Value of 18.88 converts to a U value of .0529 rounded to .05.
\1\ Winter degree-days may be obtained from the ASHRAE Handbook; the ``NAHB Insulation Manual for Homes/
  Apartments''; local utilities; and the National Climatic Center, Federal Building, Asheville, NC. Manuals are
  available from NAHB RF, Rockville, MD 20850, or NMWIA, 382 Springfield Avenue, Summit, NJ 07901. Other sources
  of degree day data may be used if available from a recognized authority.
\2\ Insulation must be continuous (i.e. no gaps) above all ceiling joists. In pitched roof construction,
  compression of insulation at the outside building walls is permitted to allow a 1 ventilation space
  under the roof sheathing. For any loose fill insulation, a baffle must be provided. Raised trusses are not
  required.
\3\ For floors of heated spaces over unheated basements, unheated garages or unheated crawl spaces, the U value
  of floor section shall not exceed the value shown. A basement, crawl space, or garage shall be considered
  unheated unless it is provided with a positive heat supply to maintain a minimum temperature of 50 degrees F.
  Positive heat supply is defined by ASHRAE as ``heat supplied to a space by design or by heat losses occurring
  from energy-consuming systems or components associated with that space.''
 AWhere the walls of an unheated basement or crawl space are insulated in lieu of floor insulation, the total
  heat loss attributed to the floor from the heated area shall not exceed the heat loss calculated for floors
  with required insulation.
 AInsulation may be omitted from floors over heated basement areas or heated crawl spaces if foundation walls
  are insulated. The U value of foundation wall sections shall not exceed the value shown. This requirement
  shall include all foundation wall area, including header joist (band joist), to a point 50 percent of the
  distance from a finish grade to the basement floor level. Equivalent Uo configurations are acceptable.


 Maximum U Values of the Foundation Wall Sections of Heated Basement Not
         Containing Habitable Living Area or Heated Crawl Space
------------------------------------------------------------------------
  Winter degree-days (65 F base)         Maximum U value       Glazing*
------------------------------------------------------------------------
2500 or less......................  No requirement..........        1.13

[[Page 132]]

 
2501 to 4500......................  0.17....................        1.13
4501 or more......................  0.10....................         .69
------------------------------------------------------------------------
*Glazing in heated basement shall be limited to 5 percent of floor area
  unless alternative Uo combination is documented.
\4\ Sliding glass doors are considered as glazing. The glazing value is
  for glass only. Glazing shall be limited to 15 percent of the gross
  area of all exterior walls enclosing heated space, except when
  demonstrated that the winter daily solar heat gain exceeds the heat
  loss and the glass area is properly screened from summer solar heat
  gain.
\5\ 1\3/4\ inch metal-faced door systems with rigid insulation core and
  durable weatherstripping providing a ``U'' value equivalent to a wood
  door with storm door and an infiltration rate no greater than .50 cfm
  per foot of crack length tested according to ASTM E-283 at 1.567 psf
  of air pressure, may be substituted for a conventional door and storm
  door. All doors shall be weatherstripped. Any glazed areas must be
  double-glazed.


       Minimum R Values of Perimeter Insulation for Slabs-on-Grade
------------------------------------------------------------------------
                                                Minimum R values*
    Winter degree-days (65 F base)     ---------------------------------
                                          Heated slab     Unheated slab
------------------------------------------------------------------------
500 or less...........................             2.8  ................
1000..................................             3.5  ................
2000..................................             4.0               2.5
3000..................................             4.8               2.8
4000..................................             5.5               3.5
5000..................................             6.3               4.2
6000..................................             7.0               4.8
7000..................................             7.8               5.5
8000..................................             8.5               6.2
9000..................................             9.2               6.8
10000 or greater......................            10.0               7.5
------------------------------------------------------------------------
*For increments between degree days shown, R values may be interpolated.

    B. All existing dwellings to be purchased with RH loan and grant 
funds shall be insulated in accordance with the following:

       Existing Construction--Maximum U Values for Ceiling, Wall and Floor Section of Various Construction
----------------------------------------------------------------------------------------------------------------
                                                             Floors \3,
       Winter degree days \1\          Ceilings   Walls \2\      4\        Glazing            Doors \5\
----------------------------------------------------------------------------------------------------------------
1000 or less.......................         0.05  .........        0.08        1.13  ...........................
1001 to 2500.......................          .04  .........         .07         .69  ...........................
2501 to 4500.......................          .03  .........         .05         .69  Storm door if hollow core
                                                                                      door or if over 25% glass.
4501 to 6000.......................          .03  .........         .05         .69  Storm Door.
6001 to 7000.......................         .026  .........         .05         .69  Storm Door.
7001 or more.......................         .026  .........         .05         .69  Storm Door.
----------------------------------------------------------------------------------------------------------------
Note.--U values are not adjusted for framing. Values calculated for components may be rounded. For example, a
  wall section with a total R Value of 18.88 converts to a U value of .0529 rounded to .05.
\1\ Winter degree days may be obtained from the ASHRAE Handbook; the ``NAHB Insulation Manual for Homes/
  Apartments;'' local utilities; and the National Climatic Center, Federal Building, Asheville, NC. Manuals are
  available from NAHB RF, Rockville, MD 20850, or NMWIA, 382 Springfield Avenue, Summit, NJ 07901. Other sources
  of degree day data may be used if available from a recognized authority.
\2\ Walls shall be insulated as near to new construction standards as economically feasible. Any exterior wall
  framing exposed during repair or rehabilitation work shall have vapor barrier installed and be fully
  insulated.
\3\ For floors of heated spaces over unheated basements, unheated garages or unheated crawl spaces the U value
  of floor section shall not exceed the value shown.
A basement, crawl space or garage shall be considered unheated unless it is provided with a positive heat supply
  to maintain a minimum temperature of 50 degrees F. Positive heat supply is defined by ASHRAE as ``heat
  supplied to a space by design or by heat losses occurring from energy-consuming systems or components
  associated with that space.''
Where the walls of an unheated basement or crawl space are insulated in lieu of floor insulation, the total heat
  loss attributed to the floor from the heated area shall not exceed the heat loss calculated for floors with
  required insulation.
Insulation may be omitted from floors over heated basement areas or heated crawl spaces if foundation walls are
  insulated. The U value of foundation wall sections shall not exceed the value shown. This requirement shall
  include all foundation wall area, including header joist (band joist), to a point 50 percent of the distance
  from a finish grade to the basement floor level. Equivalent Uo configurations are acceptable.


[[Page 133]]


 Maximum U Values of the Foundation Wall Sections of Heated Basement Not
         Containing Habitable Living Area or Heated Crawl Space
------------------------------------------------------------------------
  Winter degree days (65 F base)         Maximum U value       Glazing*
------------------------------------------------------------------------
2500 or less......................  No requirement..........        1.13
2501 to 4500......................  0.17....................        1.13
4501 or more......................  0.10....................         .69
------------------------------------------------------------------------
* Glazing in heated basement shall be limited to 5 percent of floor area
  unless alternative Uo combination is documented.
\4\ Slab edge insulation should be provided wherever practical in areas
  of 2500 or more winter degree-days. Rigid insulation placed on the
  exterior face of the slab shall be protected by a durable and weather
  resistant material.
\5\ Storm doors are not required for double doors, sliding doors or
  others where installation would be economically infeasible. 1\3/4\
  inch metal-faced door systems with rigid insulation core and durable
  weatherstripping providing a ``U'' value equivalent to a wood door
  with storm door and an infiltration rate no greater than .50 cfm per
  foot of crack length, tested according to ASTM E-283 at 1.567 psf of
  air pressure may be substituted for a conventional door and storm
  door. All doors shall be weatherstripped.

    C. Optional Standards
    Housing design not in compliance with the requirements of paragraph 
IV A or B of this exhibit may be approved in accordance with the 
provisions of this paragraph. Requests for acceptance proposed under 
paragraph C 1 of this exhibit, must be approved by the State Director. 
Requests for acceptance of site-built housing proposed under paragraph C 
2 of this exhibit must be approved by the Administrator. Requests for 
acceptance of manufactured housing proposed under paragraph C 2 of this 
exhibit may be approved by the State Director. All submissions of 
proposed options to the State Director or Administrator shall contain 
complete descriptions of materials, engineering data, test data (when U 
values claimed are lower than the ASHRAE Handbook of Fundamentals), and 
calculations to document the validity of the proposal. All data and 
calculations will be based upon the current edition of the ASHRAE 
Handbook of Fundamentals or other universally accepted data sources.

    1. Overall ``U'' values for enveloped components. The following 
requirements shall be used in determining acceptable options to the 
requirements of paragraphs IV A and IV B of this exhibit.
    a. Uo (gross wall)--Total exterior wall area (opaque wall and window 
and door) shall have a combined thermal transmittance value (Uo value) 
not to exceed the values shown in attachment 1 to this exhibit D 
(available in any FmHA or its successor agency under Public Law 103-354 
office). Equation 1 in attachment 1 shall be used to determine 
acceptable combinations to meet the requirements.
    b. Uo (gross ceiling)--Total ceiling area (opaque ceiling and 
skylights) shall have a combined thermal transmittance value (Uo value) 
not to exceed the values shown in attachment 2 to this exhibit D 
(available in any FmHA or its successor agency under Public Law 103-354 
office). Equation 2 in attachment 2 shall be used to determine 
acceptable combinations to meet the requirements.
    2. Overall structure performance. The following requirements shall 
be used in determining acceptable options to the requirements of 
paragraphs IV A and B of this exhibit.
    a. The methodology must be cost effective to the energy user, and 
must not adversely affect the structural capacity, durability or safety 
aspects of the structure.
    b. All data and calculations must show valid performance comparisons 
between the proposed option and a structure comparable in size, 
configuration, orientation and occupant usage designed in accordance 
with paragraphs IV A or B. Structures may be considered for FmHA or its 
successor agency under Public Law 103-354 loan consideration which can 
be shown by accepted engineering practice to have energy consumption 
equal to or less than those which would be attained in a representative 
structure utilizing the requirements of paragraphs IV A or B.
    3. Special consideration for seasonally occupied farm labor housing. 
The following sets forth the minimum acceptable options to the 
requirements of paragraphs IV A or B of this exhibit for seasonally 
occupied housing serving as security for farm labor housing loans and 
grants.
    a. When the period of occupancy does not encounter 500 or more 
heating degree-days (HDD) as determined by an average of the previous 10 
years based upon local climatological data published by the National 
Oceanic and Atmospheric Administration, Environmental Data Service, the 
standards of paragraphs IV A or B will not apply.
    b. When the period of use exceeds 500 HDD, the 10-year average value 
for the period of occupancy shall be used to determine the degree to 
which the thermal insulation requirements of paragraphs IV A or B shall 
apply.
    c. If mechanical cooling is provided and the period of occupancy 
encounters more than 700 cooling degree-days (CDD), as determined by an 
average of the previous 8 years based upon local climatological data 
published by the same source cited in paragraph IV C3a above, the 
thermal insulation requirements for 1,000 and less degree-days as stated 
in paragraph IV A or B shall apply.

[[Page 134]]

    D. Energy efficient construction practices. This section prescribes 
those items of design and quality control which are necessary to 
guarantee the energy efficiency of homes built according to the 
standards of this exhibit. Also included are recommendations for extra 
energy efficiency in dwellings. This section does not apply to new SFH 
construction.
    1. Infiltration. a. Requirements: All construction shall be 
performed in such a manner as to provide a building envelope free of 
excessive infiltration.
    (i) Caulking and sealants. Exterior joints around windows and door 
frames, between wall cavities and window or door frames, between wall 
and foundation, between wall and roof, between wall panels, at 
penetrations of utility services through walls, floors and roofs, and 
all other openings in the exterior envelope shall be caulked, gasketed, 
weatherstripped, or otherwise sealed. Caulking shall be silicone rubber 
base or butyl rubber base, conforming to Federal Specifications TT-S-
1543 and TT-S-1657 respectively, or materials demonstrating equivalent 
performance in resilience and durability.
    (ii) Windows shall comply with ANSI 134.1, NWMA 15-2; the air 
infiltration rate shall not exceed 0.5 ft 3/min per ft. of sash crack.
    (iii) Sliding glass doors shall comply with ANSI 134.2, NWM 15-3; 
the air infiltration rate shall not exceed .5 ft 3/min per square ft. of 
door area.
    (iv) All insulation placed in open cavity walls shall be installed 
so that all space behind electrical switches and receptacles, plumbing, 
ductwork and other obstructions in the cavity are insulated as 
completely as possible. Insulation shall be omitted on the side facing 
the conditioned area; however, the vapor barrier in walls must not be 
cut or destroyed.
    b. Recommendations: (i) Wrap outside corners of wall sheathing with 
15 lb. asphalt impregnated building felt before siding application.
    (ii) Utilize vestibules for entry doors, especially those facing 
into the direction of winter wind.
    (iii) Install plumbing, mechanical and electrical components in 
interior partitions as much as possible. All water piping should be 
insulated from freezing temperatures.
    2. Heating and/or Cooling Equipment. a. Requirements: All mechanical 
equipment for heating and/or cooling habitable space shall be designed 
to provide economy of operations.
    (i) All space heating equipment (including fireplaces) requiring 
combustion air shall be sealed combustion types, or be located in a 
nonconditioned area (such as unheated basements) or adequate combustion 
air must be provided from outside the conditioned space.
    (ii) All ductwork shall be designed and installed to minimize 
leakage. All metal to metal connections shall be mechanically joined and 
taped.
    b. Recommendations: (i) Whenever possible, locate ductwork inside of 
conditioned areas in dropped ceilings, interior partitions or other 
similar areas.
    (ii) Locate outside cooling units in areas not subject to direct 
sunlight or heat buildup.
    3. Vapor Barrier. a. Requirements: Adequate vapor barriers must be 
provided adjacent to the interior finish material of the wall or other 
closed envelope components which do not have ventilation space on the 
non-conditioned side of the insulation.
    (i) A vapor barrier at the inside of the wall or other closed 
envelope component must have a permeability (perm) rating less than that 
of any other material in the component and in no case have a perm rating 
greater than one. All vapor barriers must be sealed around all openings 
in the interior surface. Vapor barriers are not required in ceilings and 
floors. Continuous vapor barriers on ceilings, walls, and floors require 
adequate moisture vapor control in the conditioned space.
    (ii) All vapor producing or exhaust equipment shall be ducted to the 
outside and equipped with dampers. This equipment includes rangehoods, 
bathroom exhaust fans and clothes dryers. If a dwelling design proposes 
the use of windows to satisfy the kitchen and/or bathroom ventilation 
requirements of the development standards, the incorporation of 
dehumidification equipment should be considered in accordance with 
paragraph IV D 3 b. Exhaust of any equipment shall not terminate in an 
attic or crawl space.
    b. Recommendation: Forced air heating/cooling systems should include 
humidification/dehumidification systems where conditions indicate.
    E. [Reserved]
    F. New SFH construction. New SFH construction shall meet the 
requirements of CABO Model Energy Code, 1992 Edition (MEC-92).
    G. New manufactured housing.
    The Uo Value Zone indicated on the ``Heating Certificate'' for 
comfort heating shall be equal to or greater than the HUD Zone listed in 
the following table:

------------------------------------------------------------------------
                                                             FMHCSS (HUD
          RHS climate zones (winter degree days)              code) Uo
                                                             value zones
------------------------------------------------------------------------
0-1000....................................................            1
1001-2500.................................................            2
2501-4500.................................................            2
4501-6000.................................................            3
 6000..........................................            3
------------------------------------------------------------------------

    Example: If a manufactured home is to be located in a geographic 
area having between

[[Page 135]]

2501 and 4500 RHS winter degree days, the Agency will accept a Uo value 
Zone 2 unit or Zone 3 unit constructed to the HUD FMHCSS.
    If a central air conditioning system is provided by the home 
manufacturer, a ``Comfort Cooling Certificate'' must be permanently 
affixed to an interior surface of the unit that is readily visible. This 
certificate may be combined with the heating certificate on the data 
plate.
    V. General Design Recommendations:
    A. Orient homes with greatest glass area facing south with adequate 
overhangs to control solar gain during non-heating periods. Examples of 
proper roof overhangs are given in attachment 3 to this exhibit D 
(available in any FmHA or its successor agency under Public Law 103-354 
office).
    B. Arrange plantings with evergreen wind buffers on north side and 
deciduous trees on south.
    C. Whenever possible, orient entry door away from winter winds.
    D. Design house with simple shape to minimize exterior wall area.
    E. Minimize glass areas within constraints of required light and 
ventilation, applicable safety codes and other appropriate 
consideration.
    F. Minimize the amount of paved surface adjacent to the structure 
where heat gain is not desirable.
    VI. State Supplements: State supplements or policies will not be 
issued or adopted to either supplement or set requirements different 
from those of this exhibit without the prior written approval of the 
National Office.

[52 FR 8002, Mar. 13, 1987, as amended at 54 FR 6874, Feb. 15, 1989; 59 
FR 43723, Aug. 25, 1994; 64 FR 48085, Sept. 2, 1999]

 Exhibit E to Subpart A of Part 1924--Voluntary National Model Building 
                                  Codes

    The following documents address the health and safety aspects of 
buildings and related structures and are voluntary national model 
building codes as defined in Sec. 1924.4(h)(2) of this subpart. Copies 
of these documents may be obtained as indicated below:

----------------------------------------------------------------------------------------------------------------
        Building code                Plumbing code              Mechanical code             Electrical code
----------------------------------------------------------------------------------------------------------------
BOCA Basic/National Building  BOCA Basic/National         BOCA Basic/National         National Electrical Code
 Code \1\.                     Plumbing Code \1\.          Mechanical Code \1\.        \5\
Standard Building Code \2\..  Standard Plumbing Code \2\  Standard Mechanical Code    ..........................
                                                           \2\.
Uniform Building Code \3\...  Uniform Plumbing Code \3\.  Uniform Mechanical Code     ..........................
                                                           \3\.
CABO One and Two Family       ..........................  ..........................  ..........................
 Dwelling Code \4\.
----------------------------------------------------------------------------------------------------------------
\1\ Building Officials and Code Administrators International, Inc., 4051 West Flossmoor Road, Country Club
  Hills, Illinois 60477.
\2\ Southern Building Code Congress International, Inc., 900 Montclair Road, Birmingham, Alabama 35213-1206.
\3\ International Conference of Building Officials, 5360 South Workman Mill Road, Whittier, California 90601.
\4\ Council of American Building Officials, 5203 Leesburg Pike, Falls Church, Virginia 22041.
\5\ National Fire Protection Association, Batterymarch Park, Quincy, Massachusetts 02269.

            Exhibit F to Subpart A of Part 1924--Payment Bond

KNOW ALL PERSONS BY
THESE PRESENTS: that
________________________________________________________________________
(Name of Contractor)
________________________________________________________________________
(Address of Contractor)
a ----------------,
(Corporation, Partnership or Individual)
hereinafter called
PRINCIPAL and
________________________________________________________________________
(Name of Surety)
hereinafter called SURETY, are held and firm
bound unto______________________________________________________________
________________________________________________________________________
(Name of Owner)
________________________________________________________________________
(Address of Owner)

hereinafter called OWNER and the United States of America acting through 
the Farmers Home Administration or its successor agency under Public Law 
103-354 hereinafter referred to as GOVERNMENT, and unto all persons, 
firms, and corporations who or which may furnish labor, or who furnish 
materials to perform as described under the contract and to their 
successors and assigns in the total aggregate penal sum of ------, -----
- Dollars ($------) in lawful money of the United States, for the 
payment of which sum well and truly to be made, we bind ourselves, our 
heirs, executors, administrators, successors, and assigns, jointly and 
severally, firmly by these presents.

THE CONDITION OF THIS OBLIGATION is such that whereas, the PRINCIPAL 
entered into a certain contract with the OWNER, dated the ------ day of 
------19----, a copy of which is hereto attached and made a part hereof 
for the construction of:

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________


[[Page 136]]

________________________________________________________________________
NOW, THEREFORE, if the PRINCIPAL shall promptly make payment to all 
persons, firms, and corporations furnishing materials for or performing 
labor in the prosecution of the WORK provided for in such contract, and 
any authorized extension or modification thereof, including all amounts 
due for materials, lubricants, oil, gasoline, coal and coke, repairs on 
machinery; equipment and tools, consumed or used in connection with the 
construction of such WORK, and for all labor cost incurred in such WORK 
including that by a SUBCONTRACTOR, and to any mechanic or materialman 
lienholder whether it acquires its lien by operation of State or Federal 
law; then this obligation shall be void, otherwise to remain in full 
force and effect.
    PROVIDED, that beneficiaries or claimants hereunder shall be limited 
to the SUBCONTRACTORS, and persons, firms, and corporations having a 
direct contract with the PRINCIPAL or its SUBCONTRACTORS.
    PROVIDED, FURTHER, that the said SURETY for value received hereby 
stipulates and agrees that no change, extension of time, alteration or 
addition to the terms of the contract or to the WORK to be performed 
thereunder or the SPECIFICATIONS accompanying the same shall in any way 
affect its obligation on this BOND, and it does hereby waive notice of 
any such change, extension of time, alteration or addition to the terms 
of this contract or to the WORK or to the SPECIFICATIONS.
    PROVIDED, FURTHER, that no suit or action shall be commenced 
hereunder by any claimant: (a) Unless claimant, other than one having a 
direct contract with the PRINCIPAL (or with the GOVERNMENT in the event 
the GOVERNMENT is performing the obligations of the OWNER), shall have 
given written notice to any two of the following: The PRINCIPAL, the 
OWNER, or the SURETY above named within ninety (90) days after such 
claimant did or performed the last of the work or labor, or furnished 
the last of the materials for which said claim is made, stating with 
substantial accuracy the amount claimed and the name of the party to 
whom the materials were furnished, or for whom the work or labor was 
done or performed. Such notice shall be served by mailing the same by 
register mail or certified mail, postage prepaid, in an envelope 
addressed to the PRINCIPAL, OWNER, or SURETY, at any place where an 
office is regularly maintained for the transaction of business, or 
served in any manner in which legal process may be served in the state 
in which the aforesaid project is located, save that such service need 
not be made by a public officer. (b) After the expiration of one (1) 
year following the date of which PRINCIPAL ceased work on said CONTRACT, 
it being understood, however, that if any limitation embodied in the 
BOND is prohibited by any law controlling the construction hereof, such 
limitation shall be deemed to be amended so as to be equal to the 
minimum period of limitation permitted by such law.
    PROVIDED, FURTHER, that it is expressly agreed that the BOND shall 
be deemed amended automatically and immediately, without formal and 
separate amendments hereto, upon amendment to the Contract not 
increasing the contract price more than 20 percent, so as to bind the 
PRINCIPAL and the SURETY to the full and faithful performance of the 
Contract as so amended. The term ``Amendment'', wherever used in this 
BOND and whether referring to this BOND, the contract or the loan 
Documents shall include any alteration, addition, extension or 
modification of any character whatsoever.
    PROVIDED, FURTHER, that no final settlement between the OWNER or 
GOVERNMENT and the CONTRACTOR shall abridge the right of any benficiary 
hereunder, whose claim may be unsatisfied.
    IN WITNESS WHEREOF, this instrument is executed in [number] 
counterparts, each one of which shall be deemed an original, this the --
-- day of ------.
    ATTEST:
________________________________________________________________________

Principal
________________________________________________________________________
(Principal) Secretary

(SEAL)

By ------(s)
________________________________________________________________________
(Address)
________________________________________________________________________
Witness as to Principal
________________________________________________________________________
(Address)
________________________________________________________________________
Surety

ATTEST:
________________________________________________________________________
Witness as to Surety
________________________________________________________________________
(Address)
By______________________________________________________________________
    Attorney-in-Fact
________________________________________________________________________
(Address)

    Note.-- Date of BOND must not be prior to date of Contract.
    If CONTRACTOR is partnership, all partners should execute BOND.
    Important: Surety companies executing BONDS must appear on the 
Treasury Department's most current list (Circular 570 as amended) and be 
authorized to transact business in the state where the project is 
located.

[[Page 137]]

          Exhibit G to Subpart A of Part 1924--Performance Bond

KNOW ALL PERSONS BY THESE
PRESENTS: that__________________________________________________________

________________________________________________________________________
(Name of Contractor)

________________________________________________________________________
(Address of Contractor)

________________________________________________________________________
  (Corportion, Partnership, or Individual)
hereinafter called PRINCIPAL, and

________________________________________________________________________
(Name of Surety)

________________________________________________________________________
(Address of Surety)

hereinafter called SURETY, are held and firmly bound unto
________________________________________________________________________

________________________________________________________________________
(Name of Owner)

________________________________________________________________________
(Address of Owner)

hereinafter called OWNER, and the United States of America acting 
through the Farmers Home Administration or its successor agency under 
Public Law 103-354 hereinafter referred to as the GOVERNMENT in the 
total aggregate penal sum of
________________________________________________________________________
Dollars ($------)

in lawful money of the United States, for the payment of which sum well 
and truly to be made, we bind ourselves, our heirs, executors, 
administrators, successors, and assigns, jointly and severally, firmly 
by these presents.
    THE CONDITION OF THIS OBLIGATION is such that whereas, the PRINCIPAL 
entered into a certain contract with the OWNER, dated the ---- day of --
---- 19 --, a copy of which is hereto attached and made a part hereof 
for the construction of:

________________________________________________________________________

________________________________________________________________________
    NOW, THEREFORE, if the PRINCIPAL shall well, truly and faithfully 
perform its duties, all the undertakings, covenants, terms, conditions, 
and agreements of said contract during the original term thereof, and 
any extensions thereof which may be granted by the OWNER, or GOVERNMENT, 
with or without notice to the SURETY and during the guaranty period and 
if the PRINCIPAL shall satisfy all claims and demands incurred under 
such contract, and shall fully indemnify and save harmless the OWNER and 
GOVERNMENT from all costs and damages which it may suffer by reason of 
failure to do so, and shall reimburse and repay the OWNER and GOVERNMENT 
all outlay and expense which the OWNER and GOVERNMENT may incur in 
making good any default, then this obligation shall be void, otherwise 
to remain in full force and effect.
    PROVIDED, FURTHER, that the liability of the PRINCIPAL AND SURETY 
hereunder to the GOVERNMENT shall be subject to the same limitations and 
defenses as may be available to them against a claim hereunder by the 
OWNER, provided, however, that the GOVERNMENT may, at its option, 
perform any obligations of the OWNER required by the contract.
    PROVIDED, FURTHER, that the said SURETY, for value received hereby 
stipulates and agrees that no change, extension of time, alteration or 
addition to the terms of the contract or to WORK to be performed 
thereunder or the SPECIFICATIONS accompanying same shall in any way 
affect its obligation on this BOND, and it does hereby waive notice of 
any such change, extension of time, alteration or addition to the terms 
of the contract or to the WORK or to the SPECIFICATIONS.
    PROVIDED, FURTHER, that it is expressly agreed that the BOND shall 
be deemed amended automatically and immediately, without formal and 
separate amendments hereto, upon amendment to the Contract not 
increasing the contract price more than 20 percent, so as to bind the 
PRINCIPAL and the SURETY to the full and faithful performance of the 
CONTRACT as so amended. The term ``Amendment'', wherever used in this 
BOND, and whether referring to this BOND, the Contract or the Loan 
Documents shall include any alteration, addition, extension, or 
modification of any character whatsoever.
    PROVIDED, FURTHER, that no final settlement between the OWNER or 
GOVERNMENT and the PRINCIPAL shall abridge the right of the other 
beneficiary hereunder, whose claim may be unsatisfied. The OWNER and 
GOVERNMENT are the only beneficiaries hereunder.

    IN WITNESS WHEREOF, this instrument is executed in [Number] 
counterparts, each one of which shall be deemed an original, this the --
-- day of ------.

ATTEST:

Principal

________________________________________________________________________
(Principal) Secretary

(SEAL)

________________________________________________________________________

Witness as to Principal

________________________________________________________________________

(Address)

By ----------(s)

________________________________________________________________________

(Address)

________________________________________________________________________


[[Page 138]]

________________________________________________________________________
________________________________________________________________________
Surety

ATTEST:

________________________________________________________________________
Witness as to Surety

________________________________________________________________________
(Address)
By______________________________________________________________________
    Attorney-in Fact
________________________________________________________________________
(Address)
________________________________________________________________________

________________________________________________________________________

  Exhibit H to Subpart A of Part 1924--Prohibition of Lead-Based Paints

                               I. Purpose

    This exhibit prescribes the methods to be used to comply with the 
requirements of the Lead-Based Paint Poisoning Prevention Act, Public 
Law 91-695, as amended, (42 U.S.C. 4801 et seq.) and the amendment to 
section 501 (3) of Public Law 91-695 (42 U.S.C. 4841 (3)) as amended by 
the National Consumer Health Information and Health Promotion Act of 
1976, Public Law 94-317.

                               II. Policy

    The Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354 shall not permit the use of lead-based paint on 
applicable surfaces of any housing or buildings purchased, repaired, or 
rehabilitated for human habitation with financial assistance provided by 
this agency. Paints used on applicable surfaces shall not contain more 
than 0.06 percent lead by weight calculated as lead metal in the total 
nonvolatile content of liquid paints or in the dried film of paint 
already applied.

                            III. Definitions

    A. Housing and buildings mean any house, apartment, or structure 
intended for human habitation. This includes any institutional structure 
where persons reside, such as an orphanage, boarding school, dormitory, 
day care center or extended care facility, college housing, domestic or 
migratory labor housing, hospitals, group practice facilities, community 
facilities, and business or industrial facilities.
    B. Applicable surfaces means all interior surfaces, whether 
accessible or not, and those exterior surfaces which are readily 
accessible to children under 7 years of age, such as stairs, decks, 
porches, railings, windows, and doors.
    C. Lead-based paint means any paint containing more than .5 of 1 
percentum lead by weight, or with respect to paint manufactured after 
June 22, 1977, lead-based paint containing more than six one-hundredths 
of 1 percentum lead by weight.

                            IV. Requirements

    A. All new housing and buildings shall comply with paragraph II of 
this exhibit H.
    B. For all existing housing and buildings built after 1950, on which 
a loan is closed after July 19, 1978, FmHA or its successor agency under 
Public Law 103-354 requires that the applicant, borrower or tenant be 
notified of the potential hazard of lead-based paints, of the symptoms 
and treatment of lead poisoning, and of the importance and availability 
of maintenance and removal techniques for eliminating such hazards. This 
will be accomplished by providing each applicant, borrower and/or tenant 
with a copy of attachment 1 to this exhibit H, ``Lead-based Paint 
Hazards, Symptoms, Treatment and Techniques for Eliminating Hazards,'' 
available in any FmHA or its successor agency under Public Law 103-354 
County Office. Copies of attachment 1 may be obtained by the County 
Supervisor from the Finance Office, 1520 Market Street, St. Louis, MO 
63103.
    C. For all existing housing or buildings built before 1950 on which 
a loan is closed after July 19, 1978, FmHA or its successor agency under 
Public Law 103-354 requires that the applicant, borrower and/or tenant 
be notified as in paragraph IV B and a copy of attachment 2 to this 
exhibit H, ``Caution Note on Lead-Based Paint Hazard,'' available in any 
FmHA or its successor agency under Public Law 103-354 County Office, 
shall be delivered to the hands of the applicant, borrowers and/or 
tenant.
    D. For all property transfers and inventory property sales, 
attachments 1 and 2 to this Exhibit H (available in any FmHA or its 
successor agency under Public Law 103-354 office) shall be handed to the 
purchaser by the FmHA or its successor agency under Public Law 103-354 
representative.
    E. All inventory housing or buildings built before 1950 to be 
repaired, renovated, or rehabilitated shall have tests for lead content, 
and where found to be hazardous, shall have any interior lead-based 
paint removed entirely. Loose or cracked surfaces shall be cleaned down 
to the base surface before repainting with a paint containing not more 
than six one-hundredths of 1 percentum lead by weight in the total 
nonvolatile content of the paint or the equivalent measure of lead in 
the dried film of paint already applied or both. Contracting officers 
shall include the following provision prohibiting the use of lead-based 
paint in all contracts and subcontracts for construction or 
rehabilitation of housing or buildings:

                      Lead-Based Paint Prohibition

    No lead-based paint containing more than .5 of 1 percentum lead by 
weight (calculated as lead metal) in the total nonvolatile content of 
the paint, or the equivalent measure

[[Page 139]]

of lead in the dried film of paint already applied, or both, or with 
respect to paint manufactured after June 22, 1977, no lead-based paint 
containing more than .06 of 1 percentum lead by weight (calculated as 
lead metal) in the total nonvolatile content of the paint, or the 
equivalent measure of lead in the dried film of paint already applied, 
or both, shall be used in the construction or rehabilitation of 
residential structures under this contract or any subsequent 
subcontractors.
    Authority: This amendment is made under provisions of 5 U.S.C. 301, 
40 U.S.C. 486 (c).
    Done at ------, -------- this ---- day of --------, 19--.
--------------------____________________________________________________
FmHA or its successor agency under Public Law 103-354 Representative

                               V. Summary

    Section 401 of the Lead-Based Paint Poisoning Prevention Act as 
amended by the National Consumer Health Information and Health Promotion 
Act of 1976, Pub. L. 94-317, provides a requirement that each federal 
agency issue regulations and to take such other steps necessary to 
prohibit the use of lead-based paint on all applicable surfaces in 
Federal and Federally-assisted construction or rehabilitation of 
residential structures. The Lead-Based Paint Poisoning Prevention Act, 
Pub. L. 91-695, January 13, 1971, provides for grants to units of 
general local government in any state for the purpose of detecting and 
treating incidents of lead-based paint poisoning. Title II of this Act 
also provides for grants to the same units to identify those areas of 
risk including testing to detect the presence of lead-based paint on 
surfaces of residential housing.

Exhibit I to Subpart A of Part 1924--Guidelines for Seasonal Farm Labor 
                                 Housing

                               Section 100

    General--This exhibit sets forth the guidelines and minimum 
standards for planning and construction of new Labor Housing (LH) that 
will be occupied on a seasonal basis. Rehabilitation LH projects will be 
in substantial conformance with these guidelines and standards. A 
``seasonal basis'' is defined as 6 months or less per year. Seasonal 
housing for the farmworker need not be convertible to year-round 
occupancy; however, the living units shall be designed for the intended 
type of tenant, the time of occupancy, the location, the specific site, 
and the planned method of operation. It is important that the design of 
the LH site and buildings will help to create a pleasing lifestyle which 
will promote human dignity and pride among its tenants.

                               Section 200

    Codes and Regulations--Compliance is required with National, state 
and local codes or regulations affecting design, construction, 
mechanical, electrical, fire prevention, sanitation, and site 
improvement.

                               Section 300

                                Planning

    300-1  Complete architectural/engineering services in accordance 
with this subpart will be required if an LH grant is involved or the LH 
loan will involve more than four individual family units, or any number 
of group living units, or dormitory units accommodating 20 or more 
persons.
    300-2  Buildings and site design shall provide for a safe, secure, 
economical, healthful, and attractive living facility and environment 
suited to the needs of the domestic farm laborer and his/her family.
    300-3  At least 5 percent of the individual family units in a 
project, or one unit, whichever is greater, and all common use 
facilities will be accessible to or adaptable for physically handicapped 
persons. This requirement may be modified if a recipient/borrower shows, 
through a market survey acceptable to FmHA or its successor agency under 
Public Law 103-354, that a different percentage of accessible or 
adapatable units is more appropriate for a particular project and its 
service area.

                               Site Design

    301-1  General--The site design shall be arranged to utilize and 
preserve the favorable features and characteristics of the property and 
to avoid or minimize the potential harmful effect of unfavorable 
features. Particular attention is directed to Sec. 1944.164 (l), (m) and 
(n) of subpart D of part 1944 of this chapter with reference to 
compliance with subpart G of part 1940 of this chapter. Some of the 
features which must be considered are the topography, drainage, access, 
building orientation to sun and breezes; and advantageous features, such 
as vegetation, trees, good views, etc. or disadvantageous features, such 
as offensive odors, noxious plants, noise, dust, health hazards, etc.
    301-2  Drainage--Surface and subsurface drainage systems shall be 
provided in accordance with the applicable development standard and 
subpart C of part 1924 of this chapter.
    301-3  Water and Sewage Disposal--Water supply and sewage disposal 
installations shall comply with subpart C of part 1924 of this chapter, 
the applicable development standard and all governing state and local 
department of health requirements. Where environmentally and 
economically feasible, the LH facility shall connect to pubic water and 
waste disposal systems.

[[Page 140]]

    301-4  Electrical--Adequate electrical service shall be provided for 
exterior and interior lighting and for the operation of equipment.
    301-5  Vehicular Access and Parking.
    301-5.1  Safe and convenient all-weather roads shall be provided to 
connect the site and its improvements to the off-site public road.
    301-5.2  All-weather drives and parking shall be provided for 
tenants, and for trucks and buses as needed within the site. Driveways, 
parking areas and walkway locations shall be in substantial conformance 
with the applicable development standard.
    301-6  Walks:
    301-6.1  Walks shall be provided for safe convenient access to all 
dwellings and for safe pedestrian circulation throughout the development 
between locations and facilities where major need for pedstrian access 
can be anticipated, such as laundry, parking to dwelling units, common 
dining rooms, etc.
    301-6.2  Walkways shall be hard surface, such a concrete, asphalt, 
or stablized gravel, and shall be adequately drained.
    301-7  Building Location:
    301-7.1  Side and rear yards and distances between buildings shall 
conform to the applicable development standard.
    301-8.  Garbage and Refuse:
    301-8.1  Garbage and refuse containers for individual units are 
required and shall be stored on durable functional racks or shall be 
located in a central screened area with easily cleaned surfaces. Single 
containers for multiple units shall be screened and in locations 
designed to accommodate collection vehicle functions.
    301-9  Fencing:
    301-9.1  Fencing used in the site design for project privacy or 
building security shall be harmonious in appearance with other fences 
and surrounding facilities which fall within the same view.
    301-10  Outdoor living:
    301-10.1  All public areas where pedestrian use can be anticipated 
after sunset shall be adequately lighted for security purposes, such as 
walkways to common use facilities--laundry, dining halls, building 
entrances, parking areas, etc.
    301-11  Planting and Landscaping:
    301-11.1  Planting and lawns or ground covers shall be provided as 
required to protect the site from erosion, control dust, for active and 
passive recreation areas, and provide a pleasant environment.

                             Building Design

    302-1.1  Living Units Design:
    302-1.1  Individual Family Unit--One family or extended family to a 
unit which shall contain adequate space for living, dining, kitchen, 
bath and bedrooms. Multifamily type units are required whenever possible 
for economy of site and building construction.
    a. The minimum total net living unit size shall be 400 square feet. 
This size assumes occupancy of four persons. Units planned for 
additional occupants shall include an additional 60 square feet of 
living area per person.
    b. A living/dining area shall be provided to accommodate a table and 
chairs with adequate dining and circulation space for the intended 
number of occupants. The living/dining area should be combined with the 
kitchen area.
    c. The kitchen shall contain a sink, cooking range and refrigerator. 
A minimum free countertop area of six square feet is required. A minimum 
of 40 square feet of shelf area is required.
    d. Each bathroom shall contain adequate space and circulation for a 
bathtub and/or shower, water closet and lavatory. Access to the bathroom 
shall not be through another bedroom in dwelling units containing more 
than one bedroom.
    e. Bedroom areas separate from living areas are required. The design 
of the unit shall provide a minimum of 50 square feet of sleeping area 
per intended occupant including storage. Housing for families with 
children shall have a separate bedroom or sleeping area for the adult 
couples. A two foot by two foot shelf with a two foot long clothes 
hanging rod is required for each occupant.
    302-1.2  Group Living Unit-- A living unit designed for the 
occupancy of more than one family or for separate occupancy of male and/
or female groups. Common bath spaces shall be contained in the same 
building. Group living units for families shall have separate bedrooms 
for each adult couple.
    a. The design of the unit shall provide for a minimum of 620 square 
feet of total net living area for eight persons and an additional 60 
square feet for each additional occupant. Additional area shall be 
planned for a second bathroom when anticipated occupancy will exceed 
eight persons, or if it will be occupied by persons of both sexes.
    b. The kitchen shall contain an adequate sink, cooking range, 
refrigerator, and space the size of which is commensurate with the needs 
of the group living unit. A minimum of free countertop area of eight 
square feet is required. A minimum of 50 square feet of shelf area is 
required.
    c. Refer to paragraph 302-1.1 b for living/dining requirements.
    d. Each bathroom shall contain adequate space and circulation for 
comfortable access to, and use of, fixtures which will include a bathtub 
and/or shower, water closet and lavatory. In no case shall minimum 
fixtures be less than that required per paragraph 302-1.3 c below.
    e. Refer to paragraph 301-1.1 e for bedroom requirements.
    302.1.3  Dormitory Living Unit--A building which provides common 
sleeping quarters for

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persons of the same sex and may or may not contain kitchen and/or dining 
facilities in the same building as the sleeping quarters.
    a. The design of areas for sleeping purposes, using single beds, 
shall provide for not less than 72 square feet per occupant including 
storage.
    b. The design of areas for sleeping purposes, using double bunk 
beds, shall provide for not less than 40 square feet per occupant. 
Triple bunk beds will not be allowed.
    c. The design of each dormitory building must include a water closet 
and a bathtub or shower for each 12 occupants, and a lavatory for each 8 
persons. Urinals may be substituted for men's water closets on the basis 
of one urinal for one water closet, up to maximum of one-third of the 
required water closets.
    d. Adequate kitchen and dining facilities must be provided which may 
be in the dormitory building or detached at a distance of not more than 
200 feet from the sleeping quarters. In either case, the space must 
contain adequate cooking ranges, refrigerators, sinks, countertop, food 
storage shelves, tables and chairs, and circulation space. These 
facilities will comply with the requirements of the ``Food Service 
Sanitation Ordinance and Code,'' part V of the ``Food Service Sanitation 
Manual,'' U.S. Public Health Service Publication 934 (1965).
    302-2  Other Facilities:
    302-2.1  General--Other facilities, authorized by subpart D of part 
1944 of this chapter, needed by farm workers may be provided in several 
ways: part of a living unit, located in the project, or, with the 
exception of laundry facilities, available nearby.
    302-2.2  Laundry Facilities-- Laundry facilities shall be required 
on-site. Drying yards shall be provided if dryer units are not provided. 
The design of washing facilities shall plan for a minimum rate of one 
washer for each 20 occupants. One drying unit may be provided for every 
two washers, if automatic dryers are customarily provided for rental 
housing in the community. Laundry facilities shall have adequate space 
for loading the units, circulation, and clothes folding.
    302-2.3  Office and Maintenance-- An office and maintenance space 
shall be provided or available, commensurate with the number of living 
units served, and shall meet the criteria of the FmHA or its successor 
agency under Public Law 103-354 Manual of Acceptable Practices. If 
necessary, the maintenance space shall have sufficient area to 
accommodate furniture storage.
    302-2.4  Child Care Center-- Where feasible, a child care center may 
be included to provide supervised activity and safety for children while 
the parents work. Supervisors and workers for such centers are sometimes 
enlisted on a volunteer basis and the cost borne by nonprofit 
associations or community organizations. Grants are sometimes available 
through Federal or state programs. Consequently, the design of the child 
care center should meet the requirements of those sources providing 
organizational personnel and/or financing.
    302-2.5  Manager's Dwelling-- If a manager's dwelling unit is to be 
provided as a part of the FmHA or its successor agency under Public Law 
103-354 loan or grant, it will meet these guidelines. However, if it is 
necessary to provide a year-round caretaker/manager dwelling unit with 
FmHA or its successor agency under Public Law 103-354 loan or grant 
funds, it will meet the applicable development standard.
    302-2.6  Recreation-- Outdoor recreation space is required and shall 
be commensurate with the needs of the occupants. Active and passive 
recreation areas will be provided which may consist of outdoor sitting 
areas, playfields, tot lots and play equipment.

                          General Requirements

    303-1  Materials and Construction--All materials and their 
installation in a LH facility shall meet the applicable development 
standard. Any exceptions to these requirements for materials and their 
installation must be obtained with the approval of the FmHA or its 
successor agency under Public Law 103-354 National Office. Material 
should be selected that is durable and easily cleaned and maintained.
    303-2  Fire Protection--Fire protection and egress shall be provided 
to comply with the applicable development standard.
    303-3  Light, Ventilation, Screening--Natural light and ventilation 
requirements as specified in the applicable development standard shall 
be followed. Screening of all exterior openings is required.
    303-4  Ceiling Heights--Ceiling heights of habitable rooms shall be 
a minimum of seven feet six inches clear, and seven feet in halls or 
baths in dwelling units. Public rooms shall have a minimum of eight feet 
clear ceiling height. Sloping ceilings shall have at least seven feet 
six inches for \1/2\ the room with no portion less than five feet in 
height.
    303-5  Heating and Cooling--Heating and cooling and/or air 
circulation equipment shall be installed as needed for the comfort of 
the tenants, considering the climate and time of year the facility will 
be in operation. Maximum feasible use of passive solar heating and 
cooling techniques shall be required. All equipment installed will be in 
accordance with the applicable development standard to protect the 
health and safety of occupants.
    303-6  Plumbing--Plumbing materials and their installation shall 
meet the applicable development standard. Hot water will be required to 
all living units, baths, kitchens and laundry facilities.
    303-7  Insulation, Thermal Standards, Winterization--Insulation will 
be required where either heating or cooling is provided as per

[[Page 142]]

paragraph 303-5 above or when climatic conditions dictate a need for 
insulation. Insulation Standards will comply with exhibit D, paragraph 
IV C 3, of this subpart, or the state insulation standards, whichever 
are the more stringent.
    303-8  Electrical--Electrical design, equipment and installation 
shall comply with the requirements of the latest edition of the National 
Electrical Code, and the applicable development standard for materials 
and their installation. Individual family units may be separately 
metered; other types of dwelling units may be separately metered as 
required.
    303-9  Security and Winterization--Adequate management and physical 
measures will be provided as necessary to protect the facility during 
off-season periods, including adequate heating and insulation as 
required.

[52 FR 8002, Mar. 13, 1987, as amended at 52 FR 19283, May 22, 1987; 58 
FR 38922, July 21, 1993]

  Exhibit J to Subpart A of Part 1924--Manufactured Home Sites, Rental 
     Projects and Subdivisions: Development, Installation and Set-Up

Part A--Introduction
Part B--Construction and Land Development
Part C--Drawings, Specifications, Contract Documents and Other 
          Documentation
Part D--Inspection of Development Work

                          Part A--Introduction

    I. Purpose and Scope. This exhibit describes and identifies 
acceptable site development, installation and set-up practices and 
concepts for manufactured homes. It is intended for FmHA or its 
successor agency under Public Law 103-354 field personnel, builders, 
developers, sponsors, and others participating in FmHA or its successor 
agency under Public Law 103-354 housing programs.
    This exhibit applies to all manufactured homes (except those 
referenced in exhibit B of this subpart) on scattered sites or in rental 
projects and subdivisions and covers the requirements for design and 
construction of manufactured home communities. FmHA or its successor 
agency under Public Law 103-354 may approve alternatives or substitutes 
if it finds the proposed design satisfactory for the proposed use, and 
if the materials, installation, device, arrangement, or method of work 
is at least equivalent to that prescribed in this exhibit considering 
quality, strength, effectiveness, durability, safety and protection of 
life and health.
    FmHA or its successor agency under Public Law 103-354 will require 
satisfactory evidence to be submitted to substantiate claims made 
regarding the use of any proposed alternative.
    II. Background. FmHA or its successor agency under Public Law 103-
354 has authority to make (1) section 502 Rural Housing (RH) loans with 
respect to manufactured homes and lots, and (2) section 515 Rural Rental 
Housing (RRH) loans with respect to manufactured home rental projects.
    The manufactured home must be constructed in conformance with the 
Federal Manufactured Home Construction and Safety Standard (FMHCSS) and 
be permanently attached to a site-built permanent foundation which meets 
or exceeds the Minimum Property Standards (MPS) for One- and Two-Family 
Dwellings or Model Building Codes acceptable to FmHA or its successor 
agency under Public Law 103-354. The manufactured home must be 
permanently attached to that foundation by anchoring devices adequate to 
resist all loads identified in the MPS. This includes resistance to 
ground movements, seismic shaking, potential shearing, overturning and 
uplift loads caused by wind. Note that anchoring straps or cables 
affixed to ground anchors other than footings will not meet these 
requirements.
    Subpart G of part 1940 of this chapter applies on scattered sites, 
in subdivisions and rental projects to the development, installation and 
set-up of manufactured homes. To determine the level of environmental 
analysis required for a particular application, each manufactured home 
or lot involved shall be considered as equivalent to one housing unit or 
lot as these terms are used in Secs. 1940.310-1940.312 as well as in any 
other sections of subpart G of part 1940 of this chapter. The 
implementation of FmHA or its successor agency under Public Law 103-354 
environmental policies and the consideration of important land use 
impacts are of particular relevance in the review of proposed 
manufactured home sites and in achieving the two purposes highlighted 
below. Because the development, installation and set-up of manufactured 
home communities, including scattered sites, rental projects, and 
subdivisions, differ in some requirements from conventional site and 
subdivision development, two of the purposes of this exhibit are to:
    A. Encourage economical and orderly development of such communities 
and nearby areas, and
    B. Promote the safety and health of residents of such communities.
    Therefore, this exhibit identifies those required standards and 
regulations and suggested guidelines for eliminating and preventing 
health and safety hazards and promoting the economical and orderly 
development and utilization of land for planning and development of 
manufactured home communities. The exhibit also provides the 
requirements for meeting the following:
    A. Resistance to Wind. Foundations and anchorages shall be designed 
to resist wind

[[Page 143]]

forces specified in American National Standards Institute (ANSI) A-58.1-
1982 for the geographic area in which the manufactured home will be 
sited;
    B. Proper Installation. The manufacturer's installation instructions 
provided with each manufactured home shall contain instructions for at 
least one site-built foundation with interior and/or perimeter supports. 
FmHA or its successor agency under Public Law 103-354 field office 
personnel shall review to determine its adequacy as security for an FmHA 
or its successor agency under Public Law 103-354 loan only, the 
foundation design concept for compliance with this exhibit, the FmHA or 
its successor agency under Public Law 103-354/MPS and any Model Building 
Code acceptable to FmHA or its successor agency under Public Law 103-354 
in that particular geographic area; and
    C. Proper Foundation Design. Manufactured homes shall be installed 
on a foundation system which is designed and constructed to sustain, 
within allowable stress and settlement limitations, all applicable 
loads. Any foundation and anchorage system or method of construction to 
be used should be analyzed in accordance with well-established 
principles of mechanics and structural engineering.
    III. Definitions. For the purpose of this exhibit the following 
definitions apply:
    Accessory Building or Structure.
    A subordinate building or structure which is an addition to or 
supplements the facilities provided by a manufactured home.
    Anchoring Systems. An approved system for securing the manufactured 
home to the ground or foundation system that will, when properly 
designed and installed, resist overturning and lateral movement of the 
home from wind forces.
    Contiguous. Sharing a boundary, adjoining or adjacent. A lot or 
subdivision is considered to be contiguous to other lots or subdivisions 
if it is adjoining, touching or adjacent.
    Federal manufactured Home Construction and Safety Standards 
(FMHCSS). A 1976 federal standard, commonly known as the HUD Standard, 
for the construction, design and performance of a manufactured home 
which meets the needs of the public including the need for quality, 
durability and safety. Units conforming to the FMHCSS are certified by 
an affixed label that reads as follows:

    AS EVIDENCED BY THIS LABEL NO. -------- THE MANUFACTURER CERTIFIES 
TO THE BEST OF THE MANUFACTURER'S KNOWLEDGE AND BELIEF THAT THIS 
MANUFACTURED HOME HAS BEEN INSPECTED IN ACCORDANCE WITH THE REQUIREMENTS 
OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND IS CONSTRUCTED IN 
CONFORMANCE WITH THE FEDERAL MANUFACTURED HOME CONSTRUCTION AND SAFETY 
STANDARDS IN EFFECT ON THE DATE OF MANUFACTURE. SEE DATA PLATE.

    Manufactured Home. A structure which is built to the Federal 
Manufactured Home Construction and Safety Standards and FmHA or its 
successor agency under Public Law 103-354's thermal requirements. It is 
transportable in one or more sections, which in the traveling mode is 
ten body feet or more in width, and when erected on site is four hundred 
or more square feet, and which is built on a permanent foundation when 
connected to the required utilities. It is designed and constructed for 
permanent occupancy by a single family and contains permanent eating, 
cooking, sleeping and sanitary facilities. The plumbing, heating, and 
electrical systems are contained in the structure.
    Manufactured Home Community. A parcel or contiguous parcels of land 
which contains two or more manufactured home sites available to the 
general public for occupancy. Sites and units may be for rent, or sites 
may be sold for residential occupancy (as in a subdivision).
    Manufactured Home Rental Project. A parcel or multiple parcels of 
land which have been so designated and improved to contain manufactured 
homes with sites available for rent.
    Manufactured Home Site. A designated parcel of land in a 
manufactured home rental project, subdivision or scattered site designed 
for the accommodation of a unit and its accessory structures for the 
exclusive use of the occupants.
    Manufactured Home Subdivisions. Five or more contiguous (developed 
or undeveloped) lots, or building sites that meet the requirements of 
subpart C of part 1924 of this chapter.
    Permanent Perimeter Enclosure. A permanent perimeter structural 
system completely enclosing the space between the floor joist of the 
manufactured home and the ground. If separate from the foundation 
system, the permanent perimeter enclosure shall be secured to the 
perimeter of the manufactured home, properly ventilated and accessible 
and constructed of materials that conform to the FmHA or its successor 
agency under Public Law 103-354 adopted MPS requirements for 
foundations.
    Pier Support System. Consists of footings, piers, caps, leveling 
spacers, or approved prefabricated load bearing devices.
    Related Facilities. Any nonresidential structure or building used 
for rental housing related purposes.
    Site-Built Permanent Foundation System. A foundation system 
(consisting of a combination of footings, piers, caps and shims and 
anchoring devices or required structural connections) which is designed 
and constructed to support the unit and sustain, within allowable stress 
and settlement limitations,

[[Page 144]]

all applicable loads specified in ANSI A58.1-1982. All loads shall be 
transferred from the manufactured home to the earth at a depth below the 
established frost line without exceeding the safe bearing capacity of 
the supporting soil.
    Set-Up. The work performed and operations involved in the placement 
of a manufactured home on a foundation system, to include installation 
of accessories or appurtenances and anchoring devices, and when local 
regulations permit, connection of utilities, but excluding preparation 
of the site.
    IV. Compliance with Local Regulations. These requirements do not 
replace site development standards established by local law, ordinances, 
or regulations. Whenever such local standards contain more stringent 
provisions than any of the site development, installation and set-up 
minimums of FmHA or its successor agency under Public Law 103-354, the 
more stringent standards shall govern.
    V. Applicable Standards, Regulations and Manuals.-- A. Manufactured 
housing to be financed by FmHA or its successor agency under Public Law 
103-354 must comply with the following standards:
    1. Federal Manufactured Home Construction and Safety Standards, 24 
CFR part 3280, mandated by Congress under title VI of the Federal 
Housing and Community Development Act of 1974, except for Sec. 3280.506, 
``Heat Loss,'' of subpart F, ``Thermal Protection,'' to part 3280.
    2. Foundation requirements of the Minimum Property Standards as 
adopted by FmHA or its successor agency under Public Law 103-354 or a 
Model Building Code acceptable to FmHA or its successor agency under 
Public Law 103-354.
    3. [Reserved]
    4. Uniform Federal Accessibility Standard (UFAS).
    5. ANSI A58.1-1982, Minimum Design Loads for Buildings and Other 
Structures.
    B. Manufactured housing to be financed by FmHA or its successor 
agency under Public Law 103-354 shall comply with all applicable FmHA or 
its successor agency under Public Law 103-354 regulations, including but 
not limited to the following:
    1. Subpart C of part 1924 of this chapter, ``Planning and Performing 
Development Work.''
    2. Subpart A of part 1924, exhibit D, ``Thermal Performance 
Construction Standards.''
    3. Subpart G of part 1940, ``Environmental Program.''
    4. Subpart A of part 1944, ``Section 502 Rural Housing Loan 
Policies, Procedures, and Authorizations.''
    5. Subpart E of part 1944, ``Rural Rental Housing Loan Policies, 
Procedures, and Authorizations.''
    The requirements of the above references have not been repeated in 
this exhibit. Those requirements contained above are either mandatory or 
minimums and every effort should be made by the applicant, builder-
developer or dealer-contractor to utilize higher standards, when 
appropriate.

                Part B--Construction and Land Development

    I. General Acceptability Criteria. The following criteria apply to 
development on scattered sites, in subdivisions and in rental project 
communities.
    A. A manufactured home development including a site, rental project 
or subdivision shall be located on property designated for that use, 
where designations exist, by the local jurisdiction.
    B. Conditions of soil, ground water level, drainage, flooding and 
topography shall not create hazards to the property and health or safety 
of the residents.
    C. The finished grade elevation beneath the manufactured home or the 
first flood elevation of the habitable space, whichever is lower, shall 
be above the 100-year return frequency flood elevation. This requirement 
applies wherever manufactured homes may be installed, not just in 
locations designated by the National Flood Insurance Program as areas of 
special flood hazards. The use of fill to accomplish this is a last 
resort. However, as stated in Sec. 1940.304 of subpart G of part 1940 of 
this chapter, it is FmHA or its successor agency under Public Law 103-
354's policy not to approve or fund any proposal in a 100-year 
floodplain area unless there is no practicable alternative to such a 
floodplain location.
    D. Essential service such as employment centers, shopping, schools, 
recreation areas, police and fire protection, and garbage and trash 
removal shall be convenient to the development and any site, community, 
or subdivision must meet the environmental and location requirements 
contained in subpart G of part 1940 of this chapter.
    E. Manufactured home sites, rental projects and subdivisions shall 
not be subject to any adverse influences of adjacent land uses. An 
adverse influence is considered as one that is out of the acceptable 
level or range of a recognizable standard or where no standard exists is 
considered a nuisance irrespective of a site being zoned for 
manufactured home use. Health, safety and aesthetic consequences of 
location shall be carefully assessed by inspection of the site prior to 
selection of development. Undesirable land uses sush as deteriorated 
residential or commercial areas and noxious industrial properties shall 
be avoided to ensure compatibility. Other undesirable elements such as 
heavily traveled highways, airport runways, railroad, or fire hazards 
and other areas subject to recognizably intolerable noise levels shall 
be avoided.
    F. The requirements for streets shall be those found in subpart C of 
part 1924 of this chapter.

[[Page 145]]

    G. The site design and development shall be in accordance with sound 
engineering and architectural practices and shall provide for all 
utilities in a manner which allows adequate, economic, safe, energy 
efficient and dependable systems with sufficient easements for their 
required installation and maintenance.
    H. Utilities for each manufactured home site, rental housing project 
or subdivision shall be designed and installed in accordance with 
subpart C of part 1924 of this chapter; and the State health authority 
having jurisdiction, and all local laws and regulations requiring 
approval prior to construction.
    I. Exhibit C, section V of this subpart shall be complied with by 
the applicant, dealer-contractor or builder-developer for manufactured 
home projects with individual water supply and sewage disposal systems. 
This exhibit shall be used by the FmHA or its successor agency under 
Public Law 103-354 County Supervisors, District Directors, and State 
Directors in reviewing submissions.
    J. During the planning, design, and construction of the foundation 
system and/or perimeter enclosure, provisions shall be made for the 
installation and connection of on-site water, gas, electrical and sewer 
systems, which are necessary for the normal operation of the 
manufactured home. Water and sewer system hookups shall be adequately 
protected from freezing.
    II. Development on Scattered Sites and in Subdivisions.--A. General. 
Scattered sites and subdivision developments will be planned and 
constructed in accordance with specific requirements of this subpart, 
subpart C of part 1924, and subpart G of part 1940 of this chapter, and 
the applicable FmHA or its successor agency under Public Law 103-354/MPS 
or Model Building Codes acceptable to FmHA or its successor agency under 
Public Law 103-354. Manufactured homes for development in a manufactured 
home community shall:
    1. Be erected with or without a basement on a site-built permanent 
foundation that meets or exceeds applicable requirements of the FmHA or 
its successor agency under Public Law 103-354/MPS for One- and Two-
Family Dwellings or Model Building Codes acceptable to FmHA or its 
successor agency under Public Law 103-354;
    2. Be permanently attached to that foundation by anchoring devices 
adequate to resist all loads identified in the FmHA or its successor 
agency under Public Law 103-354 adopted MPS (this includes resistance to 
ground movements, seismic shaking, potential shearing, overturning and 
uplift loads caused by wind, etc.);
    3. Have had the towing hitch or running gear, which includes 
tongues, axles, brakes, wheels, lights and other parts of the chassis 
that operate only during transportation removed;
    4. Have any crawl space beneath the manufactured home properly 
ventilated and enclosed by a continuous permanent perimeter enclosure. 
If it is not the supporting foundation, designed to resist all forces to 
which it may be subject without transmitting to the building 
superstructure movements or any effects caused by frost heave, soil 
settlement (consolidation), or shrinking or swelling of expansive soils; 
and be constructed of materials that conform to FmHA or its successor 
agency under Public Law 103-354 adopted MPS requirements for 
foundations;
    5. Have the manufactured home insulated to meet the energy 
conserving requirements contained in exhibit D of this subpart;
    6. Have a manufactured home site, site improvements, and all other 
features of the mortgaged property not addressed by the Federal 
Manufactured Home Construction and Safety Standards, meet or exceed 
applicable requirements of this subpart and subpart C of part 1924 of 
this chapter, the FmHA or its successor agency under Public Law 103-354 
adopted MPS except paragraph 31-2.2 or a Model Building Code acceptable 
to FmHA or its successor agency under Public Law 103-354;
    7. Have had the manufactured unit itself braced and stiffened where 
necessary before it leaves the factory to eliminate racking and 
potential damage during transportation; and
    8. Be eligible for financing in accordance with the requirements of 
either section 502, or section 515 of FmHA or its successor agency under 
Public Law 103-354's Housing Program, for which purpose the beginning of 
construction will be the commencement of on-site work even though the 
manufactured home itself may have been produced and temporarily stored 
prior to the date of application for financing.
    B. Site Planning and Development. The site planning and development 
of manufactured home scattered sites and subdivisions shall also comply 
with the following:
    1. Arrangement of Structures and Facilities. The site, including the 
manufactured home, accessory structures, and all site improvements shall 
be harmoniously and efficiently organized in relation to topography, the 
shape of the plot, and the shape, size and position of the unit. 
Particular attention shall be paid to use, appearance and livability.
    2. Adaptation to Site Assets. The manufactured home shall be fitted 
to the terrain with a minimum disturbance of the land. Existing trees, 
rock formations, and other natural site features shall be preserved to 
the extent practical. Favorable views or outlooks shall be emphasized by 
the plan.
    3. Site Plan. The site plan shall provide for a desirable 
residential environment which is an asset to the community in which it 
is located.

[[Page 146]]

    4. Lot Size. The size of manufactured home lots (scattered sites and 
subdivision) shall be determined by Sec. 1944.11(e) of subpart A of part 
1944 and subpart C of part 1924 of this chapter.
    C. Foundation Systems, Anchoring and Set-up.
    1. The foundation system shall be constructed in accordance with 
this subpart and one of the following: (a) The foundation system 
included in the manufacturer's installation instructions meeting FmHA or 
its successor agency under Public Law 103-354/MPS requirements, (b) the 
FmHA or its successor agency under Public Law 103-354/MPS 4900.1, which 
specifies performance requirements for foundations in section 600 
``General'' and paragraph 601-16 ``Foundations,'' or (c) an FmHA or its 
successor agency under Public Law 103-354 recognized model building 
code.
    2. The manufactured home permanent foundation system shall 
constitute a permanent load bearing support system for the manufactured 
home. The manufacturer or applicant shall be permitted to design or 
specify the installation of a foundation system which meets FmHA or its 
successor agency under Public Law 103-354/MPS design requirements for 
foundations and the general requirements above.
    3. The applicant's responsibility for proper design and installation 
of the permanent foundation system, anchoring and set-up shall be in 
accordance with Sec. 1924.5(f)(1), of this subpart.
    4. The builder/developer of the manufactured home property, for 
proposed construction, shall submit with the application for financing 
by the applicant or for a conditional commitment design calculations, 
details and drawings for the installation, anchorage and construction of 
permanent foundation and perimeter enclosure to be used.
    III. Rental Housing Project Development.-- A. General. Manufactured 
housing rental developments shall be planned and constructed in 
accordance with requirements of subpart C of part 1924; this subpart; 
subpart G of part 1940, the FmHA or its successor agency under Public 
Law 103-354/MPS; and the requirements of subpart E of part 1944 of this 
chapter.
    B. Site Planning and Development. Site planning and development 
shall adapt to individual site conditions and the type of market to be 
served, reflect advances in site planning and development techniques, 
and be adaptable to the trends in design of the manufactured home. Site 
planning and development shall utilize existing terrain, trees, shrubs 
and rocks formations to the extent practicable. A regimental style site 
plan design should be avoided.
    C. Foundation Systems, Anchoring and Set-up. Foundation systems, 
anchoring and set/ups for manufactured home rental projects (site and 
home) developed under FmHA or its successor agency under Public Law 103-
354 section 515 Rural Rental Housing program shall comply with the 
requirements of paragraphs II A and II C above.
    IV. Accessory Structures and Related Facilities.-- A. General. 
Accessory structures and related facilities are dependent upon the 
manufactured home and its environment.
    1. Accessory structures and related facilities shall be planned, 
designed and constructed in accordance with the applicable provisions of 
this subpart; the FmHA or its successor agency under Public Law 103-354/
MPS; and local criteria of the authority having jurisdiction.
    2. Accessory structures and related facilities shall be designed in 
a manner that will eliminate and prevent health and safety hazards and 
enhance the appearance of the manufactured home and its environment.
    3. Accessory structures and related facilities shall not obstruct 
required openings for light and ventilation of the manufactured home and 
shall not hamper installation and utility connections of the unit.
    B. Accessory Structures. 1. Accessory structures shall not include 
spaces for pantries, bath, toilet, laundries, closets or utility rooms.
    2. Accessory structures shall be carefully designed and constructed 
for the convenience and comfort of the manufactured home occupant. These 
features significantly affect the visual appearance of the community and 
influence livability.
    C. Related Facilities (Rental Housing Projects). 1. This includes 
those facilities as defined in Secs. 1944.205(i) and 1944.212(f) of 
subpart E of part 1944 of this chapter.
    1. This includes those facilities as defined in Sec. 1944.212(e) of 
subpart E of part 1944 of this chapter.
    2. Related facilities built on-site must meet the FmHA or its 
successor agency under Public Law 103-354/MPS and subpart A of part 1924 
of this chapter or other building codes approved by FmHA or its 
successor agency under Public Law 103-354.
    3. Workmanship shall be of a quality equal to good standard 
practice. Material shall be of such kind and quality as to assure 
reasonable durability and economy of maintenance, all commensurate with 
the class of building under consideration.
    4. All members and parts of the construction shall be properly 
designed to carry all loads imposed without detrimental effect on finish 
or covering materials.
    5. The structure shall be adequately braced against lateral stresses 
and each member shall be correctly fitted and connected.
    6. Adequate precautions shall be taken to protect against fire and 
accidents.
    7. All related facilities which require accessibility to the 
handicapped must comply with the Uniform Federal Accessibility Standard 
(UFAS).

[[Page 147]]

    V. Fire Protection and Safety. A. The design of the site plan for 
each manufactured community and scattered site shall meet the fire 
protection and safety requirements of the local authority responsible 
for providing the necessary fire protection services.
    B. All fire detection and alarm systems, and water supply 
requirements for fire protection for manufactured communities shall be 
in accordance with the local authority responsible for providing the 
necessary fire protection services.
    C. Any portion of a manufactured home shall not be closer than the 
local separation requirements of the development standard for side to 
side, end to end, and end to side siting. If the exposed composite wall 
and roof of two or more manufactured homes are proposed to be joined 
they shall be without openings and constructed of materials which will 
provide a minmum one-hour fire rating each, or the manufactured homes 
are separated by a one-hour fire rated barrier designed and approved for 
such installation and permitted by the authority having jurisdiction.
    D. Manufactured homes shall not be positioned vertically (stacked) 
with one over the other in whole or in part without the specific 
approval of the authority having jurisdiction.

     Part C--Drawings, Specifications, Contract Documents and Other 
                              Documentation

    I. General. Adequate site development and foundation installation 
drawings and specfications shall be provided by the applicant or dealer-
contractor to FmHA or its successor agency under Public Law 103-354 to 
fully describe the construction and other development work. These 
documents shall be provided according to the requirements of 
Sec. 1924.5(f)(1) of this subpart. Contract documents will be prepared 
in accordance with Sec. 1924.6 and, in the case of multiple family 
housing construction and development, Sec. 1924.13 of this subpart.
    A. The documents recommended shall be used as a guide for drawings 
and specifications to be submitted in support of all types of loan and/
or grant applications involving manufactured homes. Adequate and 
accurate drawings and specifications are necessary to:
    1. Determine the acceptability of the physical environment and 
improvements,
    2. Determine compliance with the applicable standards and codes,
    3. Review cost estimates, and
    4. Provide a basis for financing, inspections, and the warranty.
    B. Detailed floor plans, drawings and specifications are not 
required for any manufactured home to be installed on a scattered site, 
in a subdivision or rental housing project. However, a schematic floor 
plan should be submitted by the applicant when applying for FmHA or its 
successor agency under Public Law 103-354 financing. The unit must have 
an affixed label as specified in paragraph XIV (c)(3) of exhibit F of 
subpart A of part 1944 indicating that the unit is constructed to the 
FmHA or its successor agency under Public Law 103-354 thermal 
requirements for the appropriate winter degree days. This will indicate 
that the manufacturer certifies that the unit has been properly 
inspected and it meets the FmHA or its successor agency under Public Law 
103-354 Thermal Performance Construction Standard.
    C. For proposed construction, the builder or dealer-contractor shall 
submit with the loan or grant application design calculations, details 
and drawings for the installation, anchorage and construction of the 
permanent foundations and perimeter enclosure to be used. Drawings and 
specifications for foundation systems will be reviewed and examined by 
either the FmHA or its successor agency under Public Law 103-354 County 
Supervisor, District Director, or State Architect/Engineer for 
foundation support locations, loads and connection requirements 
specified by the manufacturer as a basis for evaluating foundation 
compliance with the FmHA or its successor agency under Public Law 103-
354/MPS or Model Building Code, and for determining design suitability 
for soil conditions. Drawings and specifications will also be examined 
by FmHA or its successor agency under Public Law 103-354 to determine 
compliance with all other on-site features not covered by the FMHCSS.
    D. Foundation design sections and details of all critical 
construction points systems, anchorage methods, and structural items 
shall be scaled as necessary to provide all appropriate information 1:30 
(3/8''=1'-0'') minimum.
    II. Scattered Sites. Drawings for single family manufactured housing 
shall be submitted by the applicant in addition to the requirements of 
paragraph I above and the requirements of paragraphs II A and D-7 of 
exhibit C of this subpart.
    III. Subdivisions. Subpart C of part 1924 of this chapter will be 
used in preparing and providing supporting documents.
    IV. Rental Housing Projects. Subpart C of part 1924 of this chapter 
will be used in preparing and providing supporting documents.
    V. Specifications. A. Form FmHA or its successor agency under Public 
Law 103-354 424-2, ``Description of Materials,'' or other acceptable and 
comparable descriptions of all materials used for site development, 
foundation installation and the permanent perimeter enclosure shall be 
submitted with the drawings by the applicant.
    B. The material identification information shall be in sufficient 
detail to fully describe the material, size and grade. Where necessary, 
additional sheets shall be attached as

[[Page 148]]

well as manufacturer's specification sheets for equipment and/or special 
materials.

                 Part D--Inspection of Development Work

    I. General. The following policies will govern the inspection of all 
manufactured housing development work. This includes scattered sites, 
subdivisions, rental housing projects and all accessory structures and 
related facilities unless otherwise indicated.
    II. Inspections. A. The responsibility for frequency and propose of 
inspections shall be in accordance with Sec. 1924.9(b) (1), (2) and (3) 
of this subpart. The inspection requirements of Sec. 1924.13 apply to 
the planning and conduct of construction work on all 515 housing 
developments that are more extensive in scope and more complex in nature 
than those involving an individual manufactured housing unit. The Stage 
2 inspection customary for site-built housing when the building is 
enclosed is not required for manufactured homes.
    The Stage 2 inspection for manufactured homes will be made within 
two working days after erection or placement on the foundation to 
determine compliance with accepted installation drawings and 
specifications for installation and set-up and to verify that the 
correct unit is on the site.
    Stages 2 and 3 inspections for manufactured homes may be combined 
when authorized by the State Director.
    B. The borrower will join the County Supervisor or the District 
Director in making periodic inspections as often as possible and always 
for the final inspection.
    C. The borrower should be encouraged to make enough periodic visits 
to the site to be familiar with the progress and performance of the work 
in order to protect the borrower's interest. If the borrower observes or 
otherwise becomes aware of any fault or defect in the work or 
nonconformance with the contract documents, the borrower should give 
prompt written notice thereof to the dealer-contractor and a copy of the 
notice to the appropriate County Supervisor or District Director.
    D. During inspection, it will generally be infeasible to determine 
whether a manufactured unit erected on a site was properly braced and 
stiffened during transportation. Inspectors should examine these units 
to determine that there is no obvious damage or loosening of fastenings 
that may have occurred during transportation. The dealer-contractor must 
warrant these units against such damage, which should protect FmHA or 
its successor agency under Public Law 103-354's interest.
    III. Warranty Plan Coverage. The warranty requirements for all 
development work shall be in accordance with Sec. 1924.9(d) of this 
subpart and exhibit F of subpart A of part 1944 of this chapter.

[51 FR 41603, Nov. 18, 1986, as amended at 52 FR 19283, May 22, 1987; 53 
FR 2156, Jan. 26, 1988]

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Exhibit J of 
Subpart A of Part 1924 waa amended in Part A by revising paragraph 
V.B.4, By revising in Part B, paragraph II.B.4., the words 
``Sec. 1944.11(e) of subpart A of part 1944'' to read ``7 CFR part 
3550'', by revising in Part C, paragraph I.B., the words ``paragraph XIV 
(c)(3) of exhibit F of subpart A of part 1944'' to read ``exhibit D of 
this subpart'', and by revising in Part D, paragraph III, the words 
``exhibit F of subpart A of part 1944 of this chapter'' to read ``7 CFR 
part 3550, subpart B'' effective January 23, 2003. For the convenience 
of the user, the revised text is set forth as follows:

  Exhibit J to Subpart A of Part 1924--Manufactured Home Sites, Rental 
     Projects and Subdivisions: Development, Installation and Set-Up

                                * * * * *

    4. 7 CFR part 3550, ``Direct Single Family Housing Loans and Grants.

                                * * * * *

 Exhibit K to Subpart A of Part 1924--Classifications for Multi-Family 
                     Residential Rehabilitation Work

                               I. General

    This exhibit distinguishes between what FmHA or its successor agency 
under Public Law 103-354 considers maintenance and repair work, moderate 
rehabilitation and substantial rehabilitation. In all cases, the 
building or project to be rehabilitated shall be structurally sound. The 
applicant shall have a structural analysis of the existing building made 
to determine the adequacy of all structural systems for the proposed 
rehabilitation.

                             II. Definitions

    Maintenance and Repair--Work involved in the selective replacement 
and general maintenance and repair of certain materials, appliances or 
components of an existing residential building.
    Moderate Rehabilitation--All work directly involved in the 
rearrangement of interior space, the replacement of finish materials or 
components of the electrical, plumbing, heating or conveyance systems of 
an existing multi-family residential building.

[[Page 149]]

Work and improvements are considered to be more than routine maintenance 
and repair.
    Substantial Rehabilitation--All work directly involved in the 
rearrangement of interior space that involves alteration of load bearing 
partitions and columns; the replacement of the electrical, plumbing, 
heating or conveyance systems; and the addition to and/or major 
conversion of existing multi-family residential buildings or other 
building structures.
    Moderate rehabilitation and repair shall not be limited to building 
changes for cosmetic or convenience purposes. In all cases moderate 
rehabilitation shall involve a minimum of three (3) components of 
building rehabilitation listed as moderate. Unless combined with other 
improvements in a project that are considered to be moderate or 
substantial rehabilitation the items identified as maintenance and 
repair are considered to be cosmetic and convenience changes.
    When a rehabilitation project consists of both moderate and 
substantial rehabilitation components, those substantial rehabilitation 
components shall be in accordance with FmHA or its successor agency 
under Public Law 103-354's development standards and local codes and 
regulation requirements. Where the majority of project components of 
building rehabilitation are considered substantial the project shall be 
considered in the substantial rehabilitation category.
    Those site components of rehabilitation such as landscaping, 
grading, drainage, fencing, parking areas, recreation areas, water and 
waste disposal systems, etc., whether considered either maintenance and 
repair, moderate rehabilitation or substantial rehabilitation shall be 
in accordance with FmHA or its successor agency under Public Law 103-
354's development standards for site development work; all local codes 
and regulation requirements; and sound engineering and architectural 
practices.
    Any alteration of a structure listed or eligible for listing on the 
National Register of Historic Places may be considered either moderate 
or substantial rehabilitation; however, it shall conform first to the 
Secretary of the Interior's Standards for Rehabilitation and Guidelines 
for Rehabilitating Historic Buildings and then to FmHA or its successor 
agency under Public Law 103-354's requirements. In cases where the 
Secretary of the Interior's standards cannot be met, rehabilitation will 
conform to the agreed upon approaches, treatments and techniques 
resulting from the consultation process between FmHA or its successor 
agency under Public Law 103-354, the borrower, the State Historic 
Preservation Officer and the Advisory Council of Historic Preservation.

         III. Components of Multi-Family Building Rehabilitation

    The components of multi-family building rehabilitation necessary and 
generally considered by FmHA or its successor agency under Public Law 
103-354 to be either maintenance and repair, moderate rehabilitation or 
substantial rehabilitation include but are not limited to those listed 
in the following chart.

                               Components of Multi-Family Building Rehabilitation
----------------------------------------------------------------------------------------------------------------
                                                                     Maintenance     Moderate       Substantial
                             Components                               and repair  rehabilitation  rehabilitation
----------------------------------------------------------------------------------------------------------------
Air conditioning...................................................           o   ..............  ..............
Appliance replacement or repair....................................           o   ..............  ..............
Cabinet replacement or repair......................................           o   ..............  ..............
Carpeting..........................................................           o   ..............  ..............
Caulking...........................................................           o   ..............  ..............
Ceiling framing....................................................           o   ..............  ..............
Clothes closets or shelving improvements...........................           o   ..............  ..............
Door repair........................................................           o   ..............  ..............
Drywall repair.....................................................           o   ..............  ..............
Gutters and downspouts.............................................           o   ..............  ..............
Hardware replacement or repair.....................................           o   ..............  ..............
Kitchen cabinet improvement........................................           o   ..............  ..............
Lighting fixture replacement or repair.............................           o   ..............  ..............
Mail boxes.........................................................           o   ..............  ..............
Painting...........................................................           o   ..............  ..............
Paneling...........................................................           o   ..............  ..............
Partition repair...................................................           o   ..............  ..............
Roof repair........................................................           o   ..............  ..............
Signage............................................................           o   ..............  ..............
Stair repair.......................................................           o   ..............  ..............
Tile work..........................................................           o   ..............  ..............
Wallpapering.......................................................           o   ..............  ..............
Window shades and curtains.........................................           o   ..............  ..............
Door replacement...................................................  ...........             o    ..............
Drywall replacement................................................  ...........             o    ..............
Elevator components replacement....................................  ...........             o    ..............
Exterior entrance redesign, relocation.............................  ...........             o    ..............
Finish flooring materials..........................................  ...........             o    ..............
Flashing...........................................................  ...........             o    ..............
Furnace replacement................................................  ...........             o    ..............
Gas pipes..........................................................  ...........             o    ..............
Insulation.........................................................  ...........             o    ..............
Lath and plaster replacement.......................................  ...........             o    ..............
New shingles or roof replacement...................................  ...........             o    ..............
Partition (nonbearing) replacement, or relocation..................  ...........             o    ..............
Plumbing fixture replacement.......................................  ...........             o    ..............
Pointing...........................................................  ...........             o    ..............
Porch and steps alterator or replacement...........................  ...........             o    ..............
Stair replacement, or relocation...................................  ...........             o    ..............

[[Page 150]]

 
Storm windows and weatherstripping.................................  ...........             o    ..............
Subfloor material replacement......................................  ...........             o    ..............
Trim--exterior and interior........................................  ...........             o    ..............
Window replacement.................................................  ...........             o    ..............
New or alteration to the:
    Mechanical system..............................................  ...........  ..............             o
    Soil pipes.....................................................  ...........  ..............             o
    Vent pipes.....................................................  ...........  ..............             o
    Waste pipes....................................................  ...........  ..............             o
Alteration or replacement of structural components:
    Beams..........................................................  ...........  ..............  ..............
    Chimneys and vents.............................................  ...........  ..............             o
    Columns and post...............................................  ...........  ..............             o
    Electrical service--replacement or new.........................  ...........  ..............             o
    Elevator replacement...........................................  ...........  ..............             o
    Exterior walls.................................................  ...........  ..............             o
    Floor construction.............................................  ...........  ..............             o
    Footing........................................................  ...........  ..............             o
    Foundation wall................................................  ...........  ..............             o
    Foundation waterproofing.......................................  ...........  ..............             o
    Interior walls.................................................  ...........  ..............             o
----------------------------------------------------------------------------------------------------------------

    Moderate repair and rehabilitation shall not be limited to building 
changes for cosmetic purposes. In all cases moderate rehabilitation 
shall involve a minimum of three (3) components of building 
rehabilitation listed as moderate. Unless combined with other 
improvements in a project that are considered to be moderate or 
substantial rehabilitation the items identified as maintenance and 
repair are considered to be cosmetic and convenience changes.

Exhibit L to Subpart A of Part 1924--Insured 10-Year Home Warranty Plan 
                              Requirements

                               I. Purpose

    In recent years, numerous third-party home warranty plans have been 
developed offering new homeowners varying degrees of protection against 
builder default and/or major structural defects in their homes. This 
exhibit establishes the criteria and procedures by which a warranty plan 
is found acceptable for new construction of single family homes financed 
by Farmers Home Administration (FmHA) or its successor agency under 
Public Law 103-354. An acceptable warranty plan will:
    A. Assure that FmHA or its successor agency under Public Law 103-354 
borrowers receive adequate warranty coverage,
    B. In certain circumstances, eliminate the requirement for FmHA or 
its successor agency under Public Law 103-354 personnel to make the 
first two construction inspections, and
    C. Permit a loan up to the market value of the security (less the 
unpaid principal balance and past due interest of any other liens 
against the security), even though FmHA or its successor agency under 
Public Law 103-354 personnel may not have performed period inspections 
during construction.

                     II. Types of Warranty Companies

    A. An insured warranty company is underwritten by an insurance 
carrier, licensed to operate as an insurer by the states where the 
warranty company plans to operate, and has an acceptable rating from a 
nationally recognized rating company such as A.M. Best Company.
    B. A risk retention group is an insurer which is licensed in one 
state and is authorized, under the Products Liability Risk Retention Act 
of 1981, to issue its policies in all states. This authority is not 
challenged by FmHA or its successor agency under Public Law 103-354; 
however, there remains some question as to the legal propriety of a 10-
year insured warranty insurer to be a risk-retention group. If at some 
future time any state insurance commission or regulatory agency 
challenges the legal authority of such group, FmHA or its successor 
agency under Public Law 103-354 will reconsider its acceptance of the 
group.
    C. Individual state warranty plans, such as that offered by the 
State of New Jersey, are backed by the full faith and credit of the 
state government.

                         III. Plan Requirements

    To be considered acceptable, a warranty plan must include the 
following features:
    A. The entire cost (fee, premium, etc.) of the coverage is prepaid 
and coverage automatically transfers to subsequent owners without 
additional cost.
    B. The coverage is not cancellable by the warrantor (builder), 
warranty company or insurer.
    C. The coverage age includes at least the following:
    (1) For one year from the effective date, any defects caused by 
faulty workmanship of defective materials.
    (2) During the second year after the effective date, the warranty 
continues to cover the wiring, piping and duct work of the electrical, 
plumbing, heating and cooling systems, plus the items in (3).
    (3) During the third through the tenth years, the warranty continues 
to cover major structural defects. A major structural defect is actual 
damage to the load-bearing portion of the home including damage due to

[[Page 151]]

subsidence, expansion or lateral movement of the soil (excluding 
movement caused by flood or earthquake) which affects its load-bearing 
function and which vitally effects or is imminently likely to affect use 
of the home for residential purposes.
    D. A system is provided for complaint (claims) handling which 
includes a conciliation and, if necessary to resolve matters in dispute, 
arbitration arranged by the American Arbitration Association or similar 
organization.
    E. A construction inspection plan is required if FmHA or its 
successor agency under Public Law 103-354 is to eliminate the first two 
FmHA or its successor agency under Public Law 103-354 inspections or 
permit a full market value loan when FmHA or its successor agency under 
Public Law 103-354 inspections are not conducted.

                       IV. Information for Review

    A. Companies submitting warranty plans for a determination of 
acceptability must support requests with the following information.
    (1) Evidence that the insured warranty company has met the 
applicable state licensing and/or regulatory requirements in the state 
in which the company plans to operate.
    (2) Evidence that the insurance carrier underwriting the warranty 
plan is licensed to operate as an insurer in the states in which the 
company plans to operate and has an acceptable rating from a nationally 
recognized company such as A.M. Best Company.
    (3) State warrenty plan agencies will provide evidence that the plan 
is backed by the full faith and credit of the state.
    (4) A full description of the warranty plan including information on 
the fees, builder and home registration procedures, required 
construction standards, construction inspection procedures, coverage 
provided and claims procedures.
    (5) A sample copy of the warranty information and/or policy which is 
provided to the homeowner.
    (6) Suggested means by which FmHA or its successor agency under 
Public Law 103-354 field offices can readily assure that the builder is 
a member in good standing prior to loan approval and that a warrant will 
be issued upon the completion of construction prior to the final release 
of funds.
    B. Submission and Acceptance:
    (1) Insured warranty companies, except those operating as risk 
retention groups, and state warranty plan agencies will submit their 
requests and supporting information to the FmHA or its successor agency 
under Public Law 103-354 State Director in the state in which they plan 
to operate. State Directors will determine the acceptability of insured 
warranty plans and state warranty plans in their jurisdictions, notify 
the company or agency of the decision in writing and notify field 
offices by issuance of a State Supplement including the names and 
addresses of acceptable warranty companies and any other pertinent 
information.
    (2) Warranty companies claiming authority as risk retention groups 
will submit their requests and supporting information including 
certification that it has complied with all requirements of the Products 
Liability Risk Retention Act of 1981 (Pub. L. 97-45) and information 
indicating the state in which it is licensed, information to the FmHA or 
its successor agency under Public Law 103-354 National Office, Single 
Family Housing Processing Division. The National Office will determine 
the acceptability of the warranty of a risk retention group, notify the 
company of the decision in writing and notify field offices by issuance 
of an attachment to this exhibit.

                         V. Warranty Performance

    A. County Supervisors will report inadequate warranty performance 
through their District Director to the State Director. State Directors 
will review the situation, assist in resolving any problems and, if 
necessary, initiate action under subpart F of part 1942 of this chapter. 
State Directors will inform, by memorandum, the Director, Single Family 
Housing Processing Division, National Office, of any problems with 
warranty performance and if any debarment action is initiated.
    B. State Directors will annually monitor each warranty company and/
or its insurer to assure continued compliance with state licensing and/
or regulatory requirements.

               Attachment 1--Acceptable Warranty Companies

    The warranty companies listed below claim authority to act as a risk 
retention group under the Products Liability Risk Retention Act of 1981 
and as such, to operate in all States to provide 10-year home 
warranties. This authority remains subject to future challenges by any 
State insurance commissioner or regulatory agency; however, until such 
challenge is made, FmHA or its successor agency under Public Law 103-354 
accepts their warranty.

------------------------------------------------------------------------
             Name and address                     Area of operation
------------------------------------------------------------------------
Home Owners Warranty Corporation/HOW        All States.
 Insurance Company, 11 North Glebe Road,
 Arlington, Virginia 22201, (703) 516-4100.
Home Buyers Warranty, 89 Liberty Street,    All States.
 Asheville, North Carolina 22801,
 Telephone: (704) 254-4478.
Residential Warranty Corporation, P.O. Box  All States.
 641, Harrisburg, Pennsylvania 17108-0641,
 Telephone: 1-800-247-1812.

[[Page 152]]

 
Manufactured Housing Warranty Corporation,  All States.
 P.O. Box 641, Harrisburg, Pennsylvania
 17108-0641, Telephone: 1-800-247-1812.
------------------------------------------------------------------------


[52 FR 8002, Mar. 13, 1987, as amended at 56 FR 29167, June 26, 1991]



   Subpart B--Management Advice to Individual Borrowers and Applicants

    Source: 53 FR 35679, Sept. 14, 1988, unless otherwise noted.



Sec. 1924.51  General.

    This subpart contains policies for providing management advice to 
all Farm Credit Programs direct loan applicants and borrowers. Forms and 
Farm Assessment and Supervision Reference handbooks are available in any 
Agency county office.

[61 FR 35922, July 9, 1996]



Secs. 1924.52-1924.53  [Reserved]



Sec. 1924.54  Definitions.

    As used in this subpart, the following definitions apply:
    Agency. This term refers to the Farm Service Agency, its county and 
State committees and their personnel, and any successor agency.
    Commercial classified. The Agency's highest quality Farm Credit 
programs accounts. The financial condition of the borrowers is strong 
enough to enable them to absorb the normal adversities of agricultural 
production and marketing. There is ample security for all loans, there 
is sufficient cash flow to meet the expenses of the agricultural 
enterprise and the financial needs of the family, and to service debts. 
The account is of such quality that commercial lenders would likely view 
the loans as a profitable investment.
    Farm Assessment and Supervision Reference. This reference provides 
guidance to field staff on conducting assessments, year-end analyses, 
and general borrower supervision.
    Farm business plan. The automated or manual Farm and Home Plan 
system which contains a projection that accurately reflects the 
borrower's plan of operation for the production or marketing cycle. The 
annual plan may cover a period of more or less than 12 months. A normal 
year's plan, as defined in this section, will be used when the annual 
plan does not reflect typical income, expenses, and debt payments. The 
Agency will accept farm business plans other than the Farm and Home Plan 
if they provide sufficient information to enable Agency officials to 
render a sound credit decision in accordance with Agency regulations.
    Farm Credit Programs loan. Includes Farm Ownership (FO), Soil and 
Water (SW), Operating (OL), Emergency (EM), Economic Emergency (EE), 
Recreation (RL), Special Livestock (SL), Economic Opportunity (EO) and 
Softwood Timber (ST) loans. Also included are Rural Housing loans for 
farm service buildings (RHF), and Rural Housing (RH) loans where the 
borrower is also indebted for an Agency direct farm loan that is not a 
collection only or judgment account. Non-Program loans, which are 
defined in Sec. 1951.451(a), are excluded.
    Financially viable operation. A financially viable operation 
projects that it can generate sufficient income to meet annual operating 
expenses and debt payments as they become due, meet basic family living 
expenses to the extent they are not met by dependable non-farm income, 
provide for the replacement of capital items, and provide for long-term 
financial progress to enable the operator to obtain commercial credit.
    Individual. The term ``individual'' is used throughout this subpart 
to refer to the person receiving Agency supervision and management 
advice. If an applicant or borrower applies as an individual applicant, 
the term ``individual'' means the operator. In the case of an eligible 
corporation, cooperative, partnership, or joint operation, the term 
``individual'' means the entity members with the primary responsibility 
for making management decisions and carrying out the day-to-day physical 
tasks.
    Normal year plan. A projected farm business plan most 
representative, or typical, of an operation's normal income, expenses 
(including family living expenses), and capital debt payments.

[[Page 153]]

    Prospectus. Consists of a transmittal letter similar to FmHA Guide 
Letter 1951-F-3 with a current balance sheet and projected year's budget 
attached. The applicant or borrower name and address need not be 
withheld from the lender. The prospectus is used to determine lender 
interest in financing or refinancing specific direct loan applicants and 
borrowers. The prospectus will provide information regarding the 
availability of Agency loan guarantee and interest assistance.
    Standard classified. These loan accounts are fully acceptable by 
Agency standards. Loan risk and potential loan servicing costs are 
higher than would be acceptable to other lenders, but all loans are 
adequately secured. Repayment ability is adequate, and there is a high 
probability that all loans will be repaid as scheduled and in full.

[61 FR 35922, July 9, 1996]



Sec. 1924.55  Assessment of the agricultural operation.

    Assessments will be completed for direct Farm Credit Programs loan 
applicants. An assessment is a comprehensive evaluation of the 
components of an operation, the identification and prioritization of 
training and supervisory needs, and the resulting plan of supervision to 
assist the borrower in achieving financial viability. The assessment is 
the central foundation upon which to build strategies for planning, 
credit and management counseling, loan controls, analysis, borrower 
training, and all other needed supervision. An assessment will include 
thorough inspections of the operation and face-to-face meetings and 
discussions with all key individuals. At least semi-annual reviews of 
progress will be performed in accordance with paragraph (e) of this 
section.
    (a) Agency evaluation. The Agency will assess each of the areas 
described in paragraph (b) of this section in close cooperation with the 
applicant or borrower. As part of that assessment, the Agency will 
determine whether the proposed budget is feasible on a direct or 
guaranteed loan basis, the type and nature of any material financial or 
production management weaknesses in the operation, and the specific 
strategy needed, including timeframes, to effect improvements and 
control risks. Material weaknesses are those that have a significant 
impact on the net income of the operation and need to be corrected to 
enable the borrower to progress financially and eventually graduate from 
FSA farm credit programs. Examples of material weaknesses include, but 
are not limited to: lack of a farm recordkeeping system, obsolete or 
inadequate facilities, and use of outdated production practices. In the 
case of Youth loans, it is recognized that most of the component areas 
will be ``Not Applicable'' since there is no full-scale farming 
operation to consider.
    (b) The assessment is an evaluation, conducted with an applicant or 
borrower, of the following components:
    (1) Type of operation.
    (2) Goals.
    (3) Real estate, including facilities.
    (i) Location and size.
    (ii) Proposed and existing improvements.
    (iii) Presence of environmental hazards.
    (iv) Conservation practices and measures.
    (v) Adequacy and continued availability of real estate.
    (vi) External factors, such as urban encroachment and zoning 
changes.
    (4) Chattel property used in the operation.
    (5) Farm business organization and key personnel.
    (6) Historical financial data.
    (7) Projected budget.
    (8) Planned changes.
    (9) Ability to obtain guaranteed credit.
    (c) Supervision and training. Appropriate supervisory oversight and 
training recommendations will be developed based on the Agency's 
evaluation of the strengths and weaknesses of the operation in 
accordance with paragraphs (a) and (b) of this section and Sec. 1924.59.
    (d) Performing the year-end analysis. A year-end analysis is 
required for borrowers (except for Youth loans and loans flagged as 
having bankruptcy, foreclosure, or other action pending) the first year 
after an initial or subsequent loan, chattel subordination, or 
restructuring is received, borrowers

[[Page 154]]

who are financially distressed or delinquent, borrowers who have loans 
deferred, and borrowers who are receiving limited resource interest 
rates. All other borrowers (including flagged accounts) will receive a 
year-end analysis at the discretion and judgment of the Agency. However, 
at least every two years, the borrower will provide upon Agency request, 
a year-end balance sheet, actual financial performance, and a projected 
farm budget so that the borrower can be classified for graduation 
purposes in accordance with subpart F of part 1951. The year-end 
analysis should coincide with the borrower's farm budget planning 
period. The borrower will work with the Agency to:
    (1) Complete the year-end analysis, whenever possible, within the 
60-day period after completion of the borrower's business year or farm 
budget planning period.
    (2) Complete and review the ``actual'' columns on the farm business 
plan and Form FmHA 1962-1, ``Agreement for the Use of Proceeds/Release 
of Chattel Security,'' if applicable.
    (3) Develop a farm business plan for the next production cycle in 
accordance with Sec. 1924.56.
    (4) Reach agreement on key management issues. Any such agreements 
will be documented for the borrower case file and signed by the 
borrower.
    (e) For all borrowers, the assessment described under this section 
will be reviewed on at least a semi-annual basis to monitor progress. 
The borrower will consult with the Agency official in person, or if that 
is not possible, by telephone, or in writing. A meeting must be 
scheduled as soon as practicable to determine corrective options if: the 
borrower is, or expects to be, delinquent; the borrower is experiencing 
difficulties; or other significant changes have occurred. The year-end 
analysis under this section may be treated as one of the required 
assessment reviews.

[61 FR 35922, July 9, 1996]



Sec. 1924.56  Farm business planning.

    The automated Farm and Home Plan system is the primary tool used by 
the Agency to evaluate loan feasibility and prospects for achieving 
financial viability. Other manual or automated business planning systems 
may be used with the consent of the Agency.
    (a) [Reserved]
    (b) Documentation and revision of plans. Individuals must submit a 
farm business plan to the Agency, upon request, for loan approval and 
servicing purposes. An individual may request the assistance of the 
Agency official, as needed, in completing the plan. Farm business plans 
will be based only on accurate, verifiable information. If the Agency 
official and the individual cannot reach agreement, on the farm business 
plan, then the Agency will make loan approval and servicing 
determinations based on the Agency's separate, revised farm business 
plan. The individual will have the right to appeal any resulting adverse 
decision.
    (1) Historical information will be used as a guide to evaluate the 
feasibility of projected farm business plans. Individuals must provide 
the Agency with their previous 5-year production history, if available. 
Positive and negative trends, mutually agreed upon changes and 
improvements, and current input prices, will be taken into consideration 
when arriving at reasonable projections.
    (i) For individuals with less than a 5-year history, actual 
production records from an operation to be taken over by the individual 
will be considered, whenever available.
    (ii) In the absence of the information listed in paragraph (b)(1)(i) 
of this section, other reliable data sources that may be used include: 
FSA Farm Programs (formerly Agriculture Stabilization and Conservation 
Service) actual yield records and county or State averages.
    (iii) This paragraph applies when an accurate projection cannot be 
made because the individual's production history in any or all of the 
previous 5 years has been substantially affected by a disaster that has 
been declared by the President or designated by the Secretary of 
Agriculture. This paragraph also applies to those individuals who would 
have had a qualifying physical or production loss, as defined in 
Sec. 1945.154(a), from such a disaster, but who were not located in a 
designated or declared disaster area.

[[Page 155]]

    (A) If the individual's disaster years yields are less than the 
county average yields, county average yields will be used for those 
years. If county average yields are not available, State average yields 
will be used.
    (B) In calculating a baseline average yield, the individual may 
exclude the production year with the lowest actual or county average 
yield, providing the individual's yields were affected by disasters 
during at least 2 of the 5 years.
    (2) Unit prices for agricultural commodities as published in the 
State supplement will generally be used. However, regional or county 
unit prices may be used when there are transportation costs or other 
significant factors that cause a difference in commodity prices within 
the State. Individuals who can provide reliable evidence that they will 
receive a premium price for a commodity will be allowed to use the 
higher price for farm planning. The determination of disaster years will 
be based on the 5-year history of disaster declarations or designations 
for all counties contained in the State supplement.
    (3) When the Agency official and individual revise the farm business 
plan, the plan will be signed and initialed by both parties. Form FmHA 
1962-1 (available in any Agency office) will be revised whenever 
significant changes occur during the year that will affect repayment 
ability. It is the individual's responsibility to notify the Agency of 
any necessary changes. If the changes would result in a major change in 
the operation, a completely new farm business plan must be developed. 
The individual and Agency official will initial and date revisions to 
the Form FmHA 1962-1.
    (4) If the borrower and Agency cannot reach an agreement on 
revisions to the farm plan and an adverse decision results, the borrower 
may appeal. During an appeal, the Agency will make releases of normal 
income security for essential family living and farm operating expenses 
in accordance with Sec. 1962.17. If the borrower refuses to execute Form 
FmHA 1962-1 as finally determined by the Agency after an appeal, the 
account will be serviced under Sec. 1962.18. If the borrower does not 
appeal, the planned releases documented on Form FmHA 1962-1 are binding.

[61 FR 35923, July 9, 1996]



Sec. 1924.57  [Reserved]



Sec. 1924.58  Recordkeeping.

    (a) All borrowers must have a recordkeeping system, which must be 
documented as part of the assessment under Sec. 1924.55.
    (b) The selected recordkeeping system must provide information 
similar to that contained in Forms FmHA 431-2, FmHA 432-1, ``Farm Family 
Record Book,'' and FmHA 432-2, ``Five Year Inventory Record.'' The 
recordkeeping system must enable borrowers to make informed management 
decisions and allow the Agency to render loan making and servicing 
decisions in accordance with Agency program regulations.
    (c) Borrowers must maintain accurate records and submit financial 
information to the Agency when required. Failure to do so will result in 
the borrower's ineligibility for future Agency financing and loan 
servicing and may result in acceleration and collection action.

[61 FR 35924, July 9, 1996]



Sec. 1924.59  Supervision.

    The Agency's supervision is based on the information and evaluation 
resulting from the assessment of the operation. The borrower is required 
to:
    (a) Cooperate with the Agency and comply with all supervisory 
agreements, farm plans, and all other loan-related requirements.
    (b) Promptly notify the Agency of any significant change in the 
business or family expenses or the development of problem situations.
    (c) Maintain and protect the collateral for Agency loans and 
promptly report to the Agency any losses or other significant changes in 
the collateral.
    (d) Complete any training required by Sec. 1924.74.

[61 FR 35924, July 9, 1996]



Sec. 1924.60  Nonfarm enterprises.

    A nonfarm enterprise is any business enterprise which supplements 
farm income by providing goods or services for which there is a need and 
a reasonably

[[Page 156]]

reliable market. The same general policies covered in this subpart for 
giving management assistance to an applicant or borrower on farm loans 
will be followed in dealing with an applicant or borrower on nonfarm 
enterprise loans. The appropriate plans and record book will be used for 
the nonfarm enterprise. The borrower responsibilities in Sec. 1924.59(a) 
also apply to nonfarm enterprises.

[61 FR 35924, July 9, 1996]



Secs. 1924.61-1924.73  [Reserved]



Sec. 1924.74  Borrower Training program.

    (a) Introduction. (1) Supervised credit includes helping borrowers 
to develop the skills necessary for successful, efficient production and 
financial management of a farm business. An effective, formal training 
program provides a solid foundation on which borrowers can build the 
skills which will enable them to become efficient, financially sound 
producers who can obtain commercial financing. The goal of this training 
is for borrowers to develop and improve the financial and production 
management skills necessary to successfully operate a farm, build equity 
in the farm business, and become financially successful to graduate from 
Agency programs to commercial sources of credit.
    (2) The authorities contained in this section require certain Farm 
Credit Programs borrowers to obtain training in production and financial 
management concepts. Unless waived, this training will be an eligibility 
requirement for all Farm Credit Programs direct and guaranteed loans. 
The training requirement will also apply to all direct borrowers who 
receive Primary Loan Servicing actions approved under subpart S of part 
1951 of this chapter, with the exception of net recovery buyout offers. 
Borrowers who do not request new loans or servicing actions will be 
notified during farm visits and annual analyses of approved courses in 
their area. Also, a current list of approved courses will be posted in 
the County Office.
    (3) The training will be carried out by public and/or private sector 
providers of farm management and credit counseling services (including, 
but not limited to, community colleges, the Extension Service, State 
Departments of Agriculture, farm management firms, lenders, and similar 
qualified organizations).
    (4) State Directors will enter into agreements with one or more 
qualified providers in each State to conduct the training.
    (b) Processing--(1) Agency review. The determination of an 
applicant/borrower's need for enhanced training in production and 
financial management concepts will be made by the Agency. To make this 
determination, the Agency will review the case file (in the case of 
borrowers) and the complete application package for the assistance 
requested. A decision that the applicant/borrower needs such training 
cannot be used as a basis for rejecting the request for assistance. In 
the case of a cooperative, corporation, partnership, or joint operation, 
any individual member, stockholder, partner, or joint operator holding a 
majority interest in the entity or who is operating the farm must agree 
to complete the training on behalf of the entity. However, if one entity 
member is solely responsible for financial or production management, 
then only that entity member will be required to complete the training 
in that area for the entity or qualify for a partial waiver. If the 
financial and production functions of the farming operation are shared, 
the knowledge and skills of the individual(s) with the responsibility of 
production and/or financial management of the operation will be 
considered in the aggregate for granting a waiver or requiring that 
training be completed. If a waiver is not granted, these individuals 
will be required to complete the training in accordance with their 
responsibilities for production and/or financial management. This 
training must be completed within 2 years after ``Agreement to Complete 
Training,'' is signed if a waiver is not granted. When production 
training is required, a borrower must complete course work covering 
production management in crop or livestock enterprises which constitute 
twenty percent of the projected cash farm income for the coming 
production cycle, as determined by the Agency. Borrowers who are adding 
a new enterprise

[[Page 157]]

must agree to complete any required production training in that 
enterprise unless a waiver is granted by the Agency. Borrowers must also 
complete financial management training unless a waiver has been granted 
by the Agency.
    (i) Loan applicants. After the Agency has determined that the 
applicant meets all eligibility criteria for the type of assistance 
requested, the Agency will consider the applicant's need for enhanced 
training in production and financial management concepts. If the Agency 
determines the applicant is ineligible for assistance, the training 
requirement will not be considered.
    (ii) Requests for Primary Loan Servicing. Prior to Agency offer of 
any Primary Loan Servicing action, the Agency must determine whether the 
borrower must complete a training program or qualifies for a waiver. 
This determination should be made after a feasible plan has been 
developed using consolidation, rescheduling, reamortization, deferral, 
softwood timber, and/or writedown, but prior to Agency actual offer to 
restructure the borrower's accounts. This training requirement does not 
apply to those borrowers offered net recovery buyout or preservation 
loan servicing. If the borrower must complete a training program, fees 
will be included in the plan as an operating expense.
    (2) Waivers. Applicants for loans and Primary Loan Servicing 
programs may request a waiver from the training requirement by 
submitting Form FmHA 1924-27, ``Request for Waiver of Borrower Training 
Requirements,'' with the application for assistance. The waiver request 
must include the required documentation and records as specified in 
paragraphs (b)(2)(i) and (b)(2)(ii) of this section. A waiver is not 
required for those applicants who have previously received a waiver, or 
who have previously satisfied the training requirements. The applicant/
borrower must meet all training requirements for both production and 
financial management if no waiver is granted. If the borrower receives a 
waiver for production training, the requirements for financial 
management training must still be met. Conversely, if the borrower 
receives a waiver for financial management training, the requirements 
for production training must still be met. In the case of entity 
applicants, only those entity members who hold a majority interest in 
the operation or who operate the farm must meet the waiver conditions 
for the entity to qualify for a waiver. However, if one entity member is 
solely responsible for financial or production management, then only 
that entity member will be required to complete the training in that 
area for the entity or qualify for a partial waiver. If the financial 
and production functions of the farming operation are shared, the 
knowledge and skills of the individual(s) with the responsibility of 
production and/or financial management of the operation will be 
considered in the aggregate for granting a waiver or requiring that 
training be completed. If a waiver is not granted, these individuals 
will be required to complete the training in accordance with their 
responsibilities for production and/or financial management. The Agency 
may waive the financial and/or production training requirements under 
the following conditions:
    (i) The applicant has successfully completed an equivalent training 
program. To meet this requirement, the applicant must submit evidence of 
completion of a production and/or financial management course similar to 
a course approved under this section. The submission must include a 
description of the content and subjects covered in the course(s) 
completed by the applicant or entity members. The submission must also 
include evidence of completion, such as a grade report, certificate of 
completion, or written certification by the course instructor. The 
program must have covered subject areas in paragraph (d)(3)(iii) of this 
section. The Agency will review the documentation submitted by the 
applicant(s) for assistance to determine whether the training completed 
satisfies the training requirements of this section; or
    (ii) The applicant has the experience and/or training which 
demonstrates the abilities necessary for successful, efficient 
production as determined by the Agency based on documentation provided 
by the applicant with the request

[[Page 158]]

for the waiver. This documentation must include, at a minimum, the 
applicant's production records for the past 5 years and a statement 
explaining how the records demonstrate production ability.
    (3) Notifying applicants/borrowers of the the Agency's decision 
regarding training. The applicant/borrower will be informed of the the 
Agency's decision as follows:
    (i) Loan applicants receiving a waiver from the training will be 
notified in the letter of eligibility, required under Sec. 1910.6 of 
subpart A of part 1910 of this chapter. Applicants for Primary Loan 
Servicing actions who are receiving a waiver will be notified through 
exhibit B or exhibit F to subpart S of part 1951 of this chapter, as 
appropriate.
    (ii) Loan applicants required to complete the training will be 
notified in the letter of eligibility. Applicants for Primary Loan 
Servicing actions who are required to complete the training will be 
notified through exhibit B or exhibit F to subpart S of part 1951 of 
this chapter, as appropriate. The notification will include the name(s) 
of the approved vendor(s) in the applicant/borrower's area and the 
specific courses required. The notification to the applicant/borrower 
will also include a description of the scoring system to be used to 
determine if the applicant/borrower has successfully met the training 
requirements. In both loan making and servicing cases, the decision to 
require certain training is not appealable. However, the decision is 
reviewable.
    (4) Notification of applicants determined ineligible for assistance. 
In the letter informing them of the Agency's decision, applicants 
determined ineligible for assistance due to lack of management training 
and experience will be notified, for their information, of training 
programs approved under this section. If the ineligible applicant 
chooses to enroll in a training program, eligibility for future 
assistance will not be automatic upon completion of the course. 
Applicants who complete an approved course and later apply for a new 
loan must still demonstrate that they possess sufficient training and 
experience to assure reasonable prospects of success and meet other 
eligibility requirements for the assistance requested.
    (5) Contacting vendor and payment. Upon receiving the notification 
of the training requirement, the borrower is responsible for selecting 
and contacting a vendor(s), and making all arrangements to begin the 
training. Agency is not a party to fee or other agreements between the 
borrower and the vendor. Training fees must be included in the plan of 
operation as a farm operating expense. Payment of training fees is an 
authorized use of operating loan funds.
    (6) Training agreement. Prior to closing the loan or Primary Loan 
Servicing action, the applicant/borrower must sign Form FmHA 1924-23. 
This agreement will be placed in position 2 of the borrower case file.
    (7) Automated tracking system. Field offices will process certain 
data to the automated Finance Office records in order to properly track 
borrower training-related information. Reference the automated system 
user manuals for more specific information on this automated tracking 
system.
    (8) County Office monitoring. Required training will be included in 
table C of Form FmHA 431-2. Agency personnel will monitor borrower 
progress during farm visits and analyses in accordance with this 
subpart. The County Supervisor will also contact the borrower to follow 
up on unsatisfactory training progress reports. All contacts with the 
borrower will be noted in the running case record, together with the 
topics discussed and agreements reached.
    (c) Vendor's evaluation of borrower progress--(1) All required 
training must be completed within 2 years after the borrower signs Form 
FmHA 1924-23. The County Supervisor may grant a 1-year written extension 
to the agreement in cases where the borrower demonstrates he/she was 
unable to complete the training due to circumstances beyond his/her 
control, such as poor health or discontinuance of the necessary approved 
courses. Refusal to grant a 1-year extension is not an appealable 
decision.

[[Page 159]]

    (2) The vendor will provide Agency with periodic progress reports. 
The frequency of these reports will be determined by the State Director. 
These reports are not intended to reflect a grade or score, but to 
indicate whether the borrower is attending sessions and honestly 
endeavoring to complete the training program. Upon completion of the 
training, the vendor will provide the County Office with an evaluation 
of the borrower's knowledge of the course material. This evaluation 
shall specifically address the borrower's improvement toward meeting the 
goals outlined in this section. The instructor will also assign the 
borrower a score according to the following criteria:

                                  Score

    1.  The borrower attended classroom sessions as agreed, 
satisfactorily completed all assignments, and demonstrated an 
understanding of the course material.
    2.  The borrower attended classroom sessions as agreed and attempted 
to complete all assignments; however, the borrower does not demonstrate 
an understanding of the course material.
    3.  The borrower did not attend classroom sessions as agreed and/or 
did not attempt to complete assignments. In general, the borrower did 
not make a good faith effort to complete the training.

    (i) Borrowers receiving a score of 1 will have met the requirements 
of the agreement. The accounts of these borrowers will be serviced in 
accordance with existing regulations.
    (ii) Borrowers receiving a score of 2 will have met the requirements 
of the agreement. However, since these borrowers do not adequately 
demonstrate an understanding of the course material, the County 
Supervisor will develop a plan outlining the additional supervision the 
borrower will require to accomplish the objectives of Agency assistance, 
such as recommending further training, more frequent farm visits, or 
retaining professional services of an accountant, farm management 
consultant, or similar expert based upon the borrower's abilities.
    (iii) Borrowers receiving a score of 3 will not have met the 
requirements of the agreement for training. Failure to complete the 
training as agreed will cause the borrower to be ineligible for future 
Agency benefits including future direct and guaranteed loans, Primary 
Loan Servicing, Interest Assistance renewals, and restructuring of 
guaranteed loans.
    (d) Selection and approval of organizations and courses--(1) 
Identification of potential vendors. Prior to the initial approval of 
vendors and prior to renewal of approved vendor's training agreements, 
the State Director or designee shall solicit applications from all 
interested organizations, keeping in mind its cultural diversity 
responsibilities. The State Director shall contact the Chief Executive 
Officer of the State and appropriate officials from the State Department 
of Agriculture, the State Extension Service, community colleges, and 
other private or nonprofit organizations which may be interested in 
conducting this training.
    (2) Application. The vendor must submit the following items prior to 
consideration for approval:
    (i) A sample of the course materials and a description of the 
method(s) of training to be used.
    (ii) Specific training objectives for each section of the course. 
These objectives should relate to the general objectives outlined in 
paragraph (d)(3)(i) of this section.
    (iii) A detailed course agenda specifying the topics to be covered, 
the time to be devoted to each topic, and the number of sessions to be 
attended.
    (iv) A list of instructors and their qualifications, and the 
criteria by which additional instructors will be selected.
    (v) The proposed locations where training will take place. These 
sites should be within a reasonable commuting distance for borrowers to 
be served by the vendor.
    (vi) Cost per participant and/or cost per organization, i.e., cost 
for husband/wife joint operation; father/son partnership; or multiple 
members of a corporation.
    (vii) Minimum and/or maximum class size.
    (viii) A description of the organization's experience in developing 
and administering training to farmers.
    (ix) A description of the monitoring and/or quality control methods 
the organization intends to use.

[[Page 160]]

    (x) A description of the policy on allowing Agency employees to 
attend the course for monitoring purposes, i.e., the number of employees 
authorized to attend; the cost (if any); and the number of classes each 
employee can attend.
    (xi) A description of how the needs of borrowers with physical and/
or mental handicaps or learning disabilities will be met.
    (xii) A plan of how the needs of borrowers for whom English is not 
their primary language will be met.
    (3) State Office review and recommendation. Upon receipt of the 
application packages from the potential vendors, the State Director will 
review the material to assure the vendor's proposal meets the following 
minimum criteria for accomplishment of educational objectives, 
instructor qualifications, curriculum content, and vendor qualification:
    (i) Educational objectives. Upon completion of the course, the 
borrower shall be able to:
    (A) Describe the specific goals of the business, describe what 
changes are required to attain the business goals, and outline how these 
changes will occur using present and projected enterprise budgets.
    (B) Maintain and utilize a financial management information system 
which includes financial and production records, a household budget, a 
statement of financial condition, and an accrual adjusted income 
statement. The borrower shall also be able to use this system when 
making financial and production decisions.
    (C) Understand and utilize an income statement. Specifically, the 
borrower must understand the structure and major components of an income 
statement and its role in analyzing the performance of a business, be 
familiar with the cash and accrual methods of determining net farm 
income, and understand the relationship between a balance sheet and an 
income statement.
    (D) Understand and utilize a balance sheet. Specifically, the 
borrower must understand the major components of a balance sheet and its 
role in analyzing the business, be familiar with the categories of 
assets and liabilities and be able to provide examples of entries under 
each, and be familiar with the cost and market methods of valuing assets 
and liabilities and the advantages of each method.
    (E) Understand and utilize a cash flow budget. Specifically, the 
applicant must be able to explain and justify estimates for production 
and expenses, and analyze the cash flow to identify potential problems.
    (F) Using production records and other production information, be 
able to identify problems, evaluate alternatives, and make needed 
corrections to current production practices to achieve greater 
efficiency and profitability.
    (ii) Instructor qualifications. Instructor qualifications will be 
reviewed to assure sufficient knowledge of the material and sufficient 
experience in adult education. The instructors must have a bachelor's 
degree or comparable experience in the subject area they will teach and 
a minimum of three years experience in conducting training courses or 
teaching. Also, the instructors must successfully complete any 
instructor training which may be associated with the Agency approved 
course.
    (iii) Curriculum. The curriculum shall be reviewed to assure that 
the following subject matter is sufficiently addressed. A single vendor 
is not required to provide all the courses necessary to cover the entire 
curriculum; however, to the extent practicable, all topics must be 
available for all Agency districts. The State Director shall identify 
the specific crop or livestock enterprises for which training must be 
available in a given area or district, and any additional subject matter 
to be covered for each.
    (A) Business Planning. The course(s) shall cover the general areas 
of goal setting, risk management, and planning. Goal setting will 
include identification of personal and family goals, business goals, and 
short- and long-term goals. Risk management concepts will include the 
sources, magnitude and frequency of risk, risk tolerance, risk-taking 
ability of the business, and strategies for managing risk such as use of 
credit, marketing, production practices, and insurance. Finally, the

[[Page 161]]

course(s) will guide the borrower through the formulation of a long-term 
business plan for the farm and presentation of this plan to a lender.
    (B) Financial Management Systems. The course(s) shall cover all 
aspects of farm accounting, specifically: Instruction in financial 
record keeping, preparation of a household budget, development and 
analysis of accrual adjusted income statements, balance sheets, and cash 
flow budgets. The course(s) shall focus on integrating these elements 
into a financial management system which enables the borrower to make 
business decisions based on his/her analysis of financial information.
    (C) Crop Production. The course(s) shall focus on improving the 
profitability of the borrower's crop enterprises. Specifically, the 
course shall address keeping and analyzing production records, 
identifying problems in current production practices, identifying 
sources of production information and assistance, and using production 
information to analyze alternatives and identify the most profitable 
solution.
    (D) Livestock Production. The course(s) shall focus on improving the 
profitability of the borrower's livestock enterprises. Specifically, the 
course shall address keeping and analyzing production records, 
identifying problems in current production practices, identifying 
sources of production information and assistance, and using production 
information to analyze alternatives and identify the most profitable 
solution.
    (iv) Vendor. The proposed vendor of the training must have 
demonstrated a minimum of three years experience in conducting training 
courses or teaching the proposed subject matter.
    (4) Approval. After review of the applications, the State Director 
shall determine which vendors should be recommended for final approval. 
Complete application packages from the selected vendors should be 
submitted to the National Office for concurrence prior to final 
approval. Applications from accredited colleges (including community 
colleges) or universities, however, do not require National Office 
concurrence prior to final approval. If all of the instructors have not 
been selected at the time of request for approval of the vendor, the 
vendor may be approved with the condition that instructors will meet the 
criteria set out in paragraph (d)(3)(ii) of this section. After 
approval, the State Director and the vendor(s) will sign Form FmHA 1924-
24, ``Agreement to Conduct Production and Financial Management Training 
for Farmers Home Administration or its successor agency under Public Law 
103-354 Borrowers.'' This agreement will be valid for three years, 
unless revoked in writing and giving 30 days notice by the State 
Director or the vendor. The State Director may revoke the agreement if 
the vendor does not comply with the responsibilities listed in the 
agreement. Such revocation is nonappealable. The State Director will 
issue a State supplement to this subpart listing the approved vendor(s), 
the contact person for the vendor, the terms of the vendor agreements, 
and the subject matter in which each vendor is approved to conduct 
training.
    (5) Renewals. Renewal of agreements to conduct training will not be 
automatic. The vendor must request renewal in writing, provide updates 
to any changes in curricula, and provide information which indicates the 
training provided by the vendor is effective. Such information may 
include course evaluations, test scores, or statistics on the 
improvement of borrowers who have completed the course. The State 
Director must obtain National Office concurrence on any decisions to 
deny renewal of a vendor's agreement. A decision to deny renewal of a 
vendor's agreement is nonappealable.
    (e) Vendor monitoring. An operational file will be maintained in the 
State Office for each approved vendor. This file will include the 
application, National Office concurrence (if required), the signed Form 
FmHA 1924-24, documentation of Agency monitoring of the vendor, and any 
further documentation to determine the success of the vendor's program. 
To assure the training organization is correctly and effectively 
implementing the training as proposed, the State Director or designee 
will be responsible for monitoring the vendor. This monitoring shall, as 
a minimum, consist of:

[[Page 162]]

    (1) Attendance at selected training sessions for each vendor to 
verify that the agreed-upon subject matter is being covered in 
sufficient detail and to assess the effectiveness of the training 
provided by the instructors.
    (2) Review of course and instructor evaluations. Course and 
instructor evaluations will be completed by the borrowers on Form FmHA 
1924-22, ``Borrower Training Course Evaluation.'' This form will be 
provided to the borrowers by the instructor as they complete the course. 
The evaluations will be forwarded to the State Director for review. The 
results will be summarized and made part of the operational file on each 
vendor.
    (3) Monitoring of borrowers' improvement upon completion of a 
course. The State Director will analyze statistics regarding borrower 
performance, such as the graduation and delinquency of borrowers who 
have completed the required training course.

[58 FR 69195, Dec. 30, 1993, as amended at 61 FR 35924, July 9, 1996]



Secs. 1924.75-1924.99  [Reserved]



Sec. 1924.100  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0560-0154.

[61 FR 35924, July 9, 1996]

   Exhibit A to Subpart B of Part 1924--Letter to Borrower Regarding 
Releases of Farm Income To Pay Family Living and Farm Operating Expenses

                 UNITED STATES DEPARTMENT OF AGRICULTURE

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

                            (Insert Address)

(Date)
Borrower's Name)
(Address)
    Dear ------:
    Public Law 100-233 requires the Agency to notify you that you are 
entitled to have Agency release proceeds from the sale of crops, 
livestock, and livestock products planned to be marketed in the regular 
course of business including ASCS and CCC payments, so that you can pay 
essential family living and farm operating expenses. The releases will 
continue until such time as your account should become in default and 
Agency has to accelerate your account.
    To provide these releases to you, Agency regulations require that 
you fill out Form FmHA 1962-1 to explain what items of Agency security 
you intend to sell during this crop year. Please see attachment 1 of 
this letter for an explanation of this form. We request that you contact 
this office within 10 days of when you receive this letter so that we 
can complete this form and you can receive releases on a timely basis.

    Sincerely,

________________________________________________________________________
County Supervisor

                        Attachment 1 to Exhibit A

    Periodically, you will be asked to complete Form FmHA 1962-1, 
``Agreement for the Use of Proceeds/Release of Chattel Security,'' which 
will document the agreement between you and the Agency as to how 
proceeds from the sale of chattel property which serves as security for 
your Agency loans will be released. You will also need to list those 
buyers to whom you plan to sell your farm products. This plan will give 
you and the Agency a clear idea of what income you expect from your 
operation and how those proceeds will be used. The plan will set forth 
the amount of money required for paying essential family living, farm 
operating expenses, and debt service payments. You and the Agency must 
agree on how much money will be released from your crop proceeds. Such 
releases must be in accordance with Agency regulations.
    If the County Supervisor is unable to agree with and approve your 
plan for the use of the sales proceeds, you will receive a letter 
explaining why the County Supervisor is unable to approve your plan and 
how you may appeal the County Supervisor's decision. While an appeal is 
pending, Agency will release sales proceeds to be used to pay essential 
family living and farm operation expenses.
    Once a plan has been agreed on, it is important that you abide by 
the plan. The plan can always be revised or changed, as circumstances 
require, provided you and Agency can agree to the revisions.
    Planned sales can be listed by month, by quarter or by whatever 
period suits your operation the best. The form does not have to be 
completed to show each individual animal, bushel, bale, etc. The form is 
a plan: it contains only projections. We expect your projections to be 
realistic and based on your past experience, but we know that you cannot 
predict exactly how many bushels per acre you will harvest, exactly how 
many animals you will wean, etc. We also realize that

[[Page 163]]

you cannot predict prices to the penny. Sometimes you will have a buyer 
for your products who is not listed on the form. All we expect of you is 
to be as accurate as you can. Later, if the plan needs to be changed, 
you and the County Supervisor can work together to revise it. Many 
revisions can be agreed on over the telephone and a trip to the County 
Office is not always needed. You are not required to check with Agency 
before making a sale just because the price you expected to receive is 
different from what you had planned to receive. However, a difference in 
price might require your plan to be revised, so Agency wants to be told 
about the difference as soon as possible after the sale is made. you are 
expected to obtain Agency approval before making a major change in your 
operation or before you use sale proceeds in a way different than you 
agreed to.
    If at all possible, you should let Agency know if you are going to 
sell to a buyer who is not listed on the form. The attached chart gives 
certain examples when you must get prior consent from the Agency and 
when you may advise Agency after the sales of your farm products.

 What To Do If You Want To Take Actions That Are Different Than What Is
                     Listed on Your Form FmHA 1962-1
------------------------------------------------------------------------
             Get prior consent                 Give notice afterwards
------------------------------------------------------------------------
 You Must Get Agency PRIOR CONSENT if You   You Can Take Action and Then
                 Want to:                         Give Agency Notice
                                              AFTERWARDS if You Want to:
1) Sell, exchange, consume, or otherwise    4) Dispose of your property
 dispose of property that is not listed on   at a time that is different
 your Form FmHA 1962-1;                      than what you listed in the
                                             ``MONTH'' section of your
                                             Form FmHA 1962-1;
2) Dispose of chattel security in a way     5) Sell (or exchange) your
 not listed in the ``HOW'' section of your   property to a person or
 Form FmHA 1962-1 (for example, feed corn    business that is not listed
 to livestock instead of selling it;         in the ``POTENTIAL
                                             PURCHASERS'' section of
                                             your Form FmHA 1962-1;
3) Use proceeds in a way not listed in the  6) Sell, exchange, consume,
 ``USE OF PROCEEDS'' section of your Form    or otherwise dispose of a
 FmHA 1962-1 (for example, use proceeds to   quantity of property that
 buy equipment instead of to pay debt).      is different than what you
                                             listed in the ``QUANTITY''
                                             section of your Form FmHA
                                             1962-1;
                                            7) Accept a price for your
                                             property that is different
                                             than what you listed in the
                                             ``AMOUNT OF PROCEEDS''
                                             section of your Form FmHA
                                             1962-1.
------------------------------------------------------------------------


[53 FR 35679, Sept. 14, 1988, as amended at 56 FR 15821, Apr. 18, 1991; 
61 FR 35924, July 9, 1996]



        Subpart C--Planning and Performing Site Development Work

    Source: 60 FR 24543, May 9, 1995, unless otherwise noted.

    Editorial Note: Nomenclature changes appear at 61 FR 2899, Jan. 30, 
1996.



Sec. 1924.101  Purpose.

    This subpart establishes the basic Rural Housing Service (RHS) 
policies for planning and performing site development work. It also 
provides the procedures and guidelines for preparing site development 
plans consistent with Federal laws, regulations, and Executive Orders.



Sec. 1924.102  General policy.

    (a) Rural development. This subpart provides for the development of 
building sites and related facilities in rural areas. It is designed to:
    (1) Recognize community needs and desires in local planning, 
control, and development.
    (2) Recognize standards for building-site design which encourage and 
lead to the development of economically stable communities, and the 
creation of attractive, healthy, and permanent living environments.
    (3) Encourage improvements planned for the site to be the most cost-
effective of the practicable alternatives. Encourage utilities and 
services utilized to be reliable, efficient, and available at reasonable 
costs.
    (4) Provide for a planning process that will consider impacts on the 
environment and existing development in order to formulate actions that 
protect, enhance, and restore environmental quality.
    (5) No site will be approved unless it meets the requirements of 
this part and all state and local permits and approvals in connection 
with the proposed development have been obtained.
    (b) Subdivisions. RHS does not review or approve subdivisions. Each 
site approved by RHS must meet the requirements of Sec. 1924.115, on a 
site by site basis.
    (c) Development related costs. (1) Applicant. The applicant is 
responsible for all costs incurred before loan or grant

[[Page 164]]

closing associated with planning, technical services, and actual 
construction. These costs may be included in the loan or grant as 
authorized by RHS regulations.
    (2) Developer. The developer is responsible for payment of all costs 
associated with development.



Sec. 1924.103  Scope.

    This subpart provides supplemental requirements for Rural Rental 
Housing (RRH) loans, Rural Cooperative Housing (RCH) loans, Farm Labor 
Housing (LH) loans and grants, and Rural Housing Site (RHS) loans. It 
also provides a site development standard, as indicated in exhibit B of 
FmHA Instruction 1924-C (available in any RHS field office), which 
supplements this subpart to provide the minimum for the acceptability of 
development. All of this subpart applies to Single Family Housing unless 
otherwise noted. All of this subpart also applies to Multiple Family 
Housing except Secs. 1924.115 and 1924.120, and any paragraph 
specifically designated for Single Family Housing only. In addition, RHS 
will consult with appropriate Federal, state, and local agencies, other 
organizations, and individuals to implement the provisions of this 
subpart.



Sec. 1924.104  Definitions.

    As used in this subpart:
    Applicant. Any person, partnership, limited partnership, trust, 
consumer cooperative, corporation, public body, or association that has 
filed a preapplication, or in the case of RHS programs that do not 
require a preapplication, an official application, with RHS in 
anticipation of receiving or utilizing RHS financial assistance.
    Community. A community includes cities, towns, boroughs, villages, 
and unincorporated places which have the characteristics of incorporated 
areas with support services such as shopping, post office, schools, 
central sewer and water facilities, police and fire protection, 
hospitals, medical and pharmaceutical facilities, etc., and are easily 
identifiable as established concentrations of inhabited dwellings and 
private and public buildings.
    Developer. Any person, partnership, public body, or corporation who 
is involved with the development of a site which will be financed by 
RHS.
    Development. The act of building structures and installing site 
improvements on an individual dwelling site, a subdivision, or a 
multiple family tract.
    Multiple Family Housing. RHS RRH loans, RCH loans, LH loans and 
grants, and RHS loans.
    Single Family Housing. RHS Rural Housing loans for individuals for 
construction of, repair of, or purchase of a dwelling to be occupied by 
one household.
    Site. A parcel of land proposed as a dwelling site, with or without 
development.
    Site approval official. The RHS making the determination that a site 
meets the requirements in this subpart to be acceptable for site loans. 
(See Sec. 1924.120.)
    Street surfaces. Streets may be hard or all-weather surfaced.
    (1) Hard surface--a street with a portland cement concrete, 
asphaltic concrete, or bituminous wearing surface or other hard surfaces 
which are acceptable and suitable to the local public body for use with 
local climate, soil, gradient, and volume and character of traffic.
    (2) All-weather--a street that can be used year-round with a minimum 
of maintenance, such as the use of a grader and minor application of 
surface material, and is acceptable and suitable to the local public 
body for use with local climate, soil, gradient, and volume and 
character of traffic.
    Subdivision. Five or more contiguous (developed or undeveloped) lots 
or building sites. Subdivisions may be new or existing.



Sec. 1924.105  Planning/performing development.

    (a) General. Planning is an evaluation of specific development for a 
specific site. Planning must take into consideration topography, soils, 
climate, adjacent land use, environmental impacts, energy efficiency, 
local economy, aesthetic and cultural values, public and private 
services, housing and social conditions, and a degree of flexibility to 
accommodate changing demands. All planning and performing development 
work is the responsibility of the

[[Page 165]]

applicant or developer. All development will be arranged and completed 
according to applicable local, state, or Federal regulations including 
applicable health and safety standards, environmental requirements, and 
requirements of this subpart. When a public authority requires 
inspections prior to final acceptance, written assurance by the 
responsible public authority of compliance with local, city, county, 
state or other public codes, regulations, and ordinances is required 
prior to final acceptance by RHS.
    (1) [Reserved]
    (2) Technical Services. [Reserved]
    (i) [Reserved]
    (ii) An applicant or developer for a Multiple Family Housing project 
or a Single Family Housing site which requires technical services under 
Sec. 1924.13(a), must contract for the technical services of an 
architect, engineer, land surveyor, landscape architect, or site 
planner, as appropriate, to provide complete planning, drawings, and 
specifications. Such services may be provided by the applicant's or 
developer's ``in house'' staff subject to RHS concurrence. Technical 
services must be performed by professionals who are qualified and 
authorized to provide such services in the state in which the project 
would be developed. All technical services must be provided in 
accordance with the requirements of professional registration or 
licensing boards. At completion of all construction or completion of a 
phase or phases of the total project, the persons providing technical 
services under this section must notify the RHS field office in writing 
that all work has been completed in substantial conformance with the 
approved plans and specifications.
    (iii) For developments not specifically required to have technical 
services under paragraph (a)(2)(ii) of this section, such services may 
be required by the state director when construction of streets or 
installation of utilities is involved.
    (3) Drawings, specifications, contract documents, and other 
documentations. Adequate drawings and specifications must be provided by 
the applicant or developer to RHS in sufficient detail to fully and 
accurately describe the proposed development. Contract documents must be 
prepared in accordance with Sec. 1924.6 or, in the case of more complex 
construction, Sec. 1924.13.
    (b) Single Family Housing. Proposals for development of individual 
dwelling sites must meet the following requirements:
    (1) Site development design requirements. Exhibit B (available in 
any RHS field office) will be used as a minimum by applicants or 
developers in preparing proposals and supporting documents for Single 
Family Housing loans, in addition to specific requirements made in this 
subpart.
    (2) [Reserved]
    (c) Multiple Family Housing. Exhibit C (available in any RHS office) 
should be used as a guide by the applicant or developer in preparing a 
proposal and supporting documents for multiple family housing projects.



Sec. 1924.106  Location.

    (a) General. It is RHS's policy to promote compact community 
development and not to approve sites located in floodplains, on 
wetlands, or on important farmlands, unless there is no practical 
alternative. Furthermore, RHS will not finance development on locations 
that adversely affect properties which are listed or are eligible for 
listing on the National Register of Historic Places, located within the 
Coastal Barrier Resource System, or on a barrier island. (Environmental 
requirements are found in 7 CFR part 1940, subpart G.) In order to be 
eligible for RHS participation:
    (1) The site must be located in an eligible area as defined in the 
program regulations under which the development is being funded or 
approved.
    (2) The site must comply with the applicable environmental laws, 
regulations, Executive Orders, and subpart G of part 1940.
    (b) Single Family Housing. In addition to the general requirements 
in paragraph (a) of this section, sites must provide a desirable, safe, 
functional, convenient, and attractive living environment for the 
residents.

[[Page 166]]

    (c) Multiple Family Housing. Multiple family housing projects shall 
be located in accordance with the requirements in paragraph (r) of 
Sec. 1944.215. Locating sites in less than desirable locations of the 
community because they are in close proximity to undesirable influences 
such as high activity railroad tracks; adjacent to or behind industrial 
sites; bordering sites or structures which are not decent, safe, or 
sanitary; or bordering sites which have potential environmental concerns 
such as processing plants, etc., is not acceptable. Screening such sites 
does not make them acceptable. Sites which are not an integral part of a 
residential community and do not have a reasonable access, either by 
location or terrain, to essential community facilities such as water, 
sewerage, schools, shopping, employment opportunities, medical 
facilities, etc., are not acceptable.



Sec. 1924.107  Utilities.

    All development under this subpart must have adequate, economic, 
safe, energy efficient, dependable utilities with sufficient easements 
for installation and maintenance.
    (a) Water and wastewater disposal systems. (1) Single Family 
Housing. If sites are served by central water or sewer systems, the 
systems must meet the requirements of paragraphs (a)(2) (i) and (ii) of 
this section. If sites have individual water or sewer systems, they must 
meet the requirements of the state department of health or other 
comparable reviewing and regulatory authority and the minimum 
requirements of exhibit B (available in any RHS field office), 
paragraphs V and VI. Sites in subdivisions of more than 25 dwelling 
units on individual systems, or sites that do not meet the requirements 
of exhibit B, paragraphs V and VI, must have state director concurrence.
    (2) Multiple Family Housing. Proposals processed under this 
paragraph shall be served by centrally owned and operated water and 
wastewater disposal systems unless this is determined by RHS to be 
economically or environmentally not feasible. All central systems, 
whether they are public, community, or private, shall meet the design 
requirements of the state department of health or other comparable 
reviewing and regulatory authority. The regulatory authority will verify 
in writing that the water and wastewater systems are in compliance with 
the current provisions of the Safe Drinking Water Act and the Clean 
Water Act, respectively.
    (i) Sites which are not presently served by a central system, but 
are scheduled for tie-in to the central system within 2 years, should 
have all lines installed during the initial construction. Such sites 
must have an approved interim water supply or wastewater disposal system 
installed capable of satisfactory service until the scheduled tie-in 
occurs.
    (ii) In addition to written assurance of compliance with state and 
local requirements, there must be assurance of continuous service at 
reasonable rates for central water and wastewater disposal systems. 
Public ownership is preferred whenever possible. In cases where interim 
facilities are installed pending extension or construction of permanent 
public services, the developer must assume responsibility for the 
operation and maintenance of the interim facility or establish an entity 
for its operation and maintenance which is acceptable to the local 
governing body. If a system is not or will not be publicly owned and 
operated, it must comply with one of the following:
    (A) Be an organization that meets the ownership and operating 
requirements for a water or wastewater disposal system that RHS could 
finance under 7 CFR part 1942, subpart A or be dedicated to and accepted 
by such an organization.
    (B) Be an organization or individual that meets other acceptable 
methods of ownership and operation as outlined in HUD Handbook 4075.12, 
``Ownership and Organization of Central Water and Sewerage Systems.'' 
RHS should be assured that the organization has the right, in its sole 
discretion, to enforce the obligation of the operator of the water and 
sewerage systems to provide satisfactory continuous service at 
reasonable rates.
    (C) Be adequately controlled as to rates and services by a public 
body (unit of Government or public services commission).

[[Page 167]]

    (iii) Multiple family developments of more than 25 units with 
individual system must have national office concurrence.
    (A) [Reserved]
    (B) Supporting information for the proposed individual water 
systems, covering the following points:
    (1) In areas where difficulty is anticipated in developing an 
acceptable water supply, the availability of a water supply will be 
determined before closing the loan.
    (2) Documentation must be provided that the quality of the supply 
meets the chemical, physical, and bacteriological standards of the 
regulatory authority having jurisdiction. The maximum contaminant levels 
of U.S. EPA shall apply. Individual water systems must be tested for 
quantity and bacteriological quality. Where problems are anticipated 
with chemical quality, chemical tests may be required. Chemical tests 
would be limited to analysis for the defects common to the area such as 
iron and manganese, hardness, nitrates, pH, turbidity, color, or other 
undesirable elements. Polluted or contaminated water supplies are 
unacceptable. In all cases, assurance of a potable water supply before 
loan closing is required.
    (C) Supporting information for individual wastewater disposal 
systems with subsurface discharge provided by a soil scientist, 
geologist, soils engineer, or other person recognized by the local 
regulatory authority. This data must include the following:
    (1) Assurance of nonpollution of ground water. The local regulatory 
authority having jurisdiction must be consulted to ensure that 
installation of individual wastewater systems will not pollute ground 
water sources or create other health hazards or otherwise violate State 
water quality standards.
    (2) Records of percolation tests. Guidance for performing these 
tests is included in the EPA design manual, ``Onsite Wastewater 
Treatment and Disposal Systems'' and the minimum RHS requirements are in 
exhibit B, paragraph VI. (These may be waived by the state director when 
the state has established other acceptable means for allowing onsite 
disposal.)
    (3) Determination of soil types and description. The assistance of 
the SCS or other qualified persons should be obtained for soil type 
determination and a copy of its recommendations included in the 
documentation.
    (4) Description of ground water elevations, showing seasonal 
variations.
    (5) Confirmation of space allowances. An accurate drawing to 
indicate that there is adequate space available to satisfactorily locate 
the individual water and wastewater disposal systems; likewise, 
documented assurance of compliance with all local requirements. 
Structures served by wastewater disposal systems with subsurface 
discharge require larger sites than those structures served by another 
type system.
    (6) Description of exploratory pit observations, if available.
    (D) Supporting information for individual wastewater disposal 
systems with surface discharge covering the following points:
    (1) Effluent standards issued by the appropriate regulatory agency 
that controls the discharge of the proposed individual systems. 
Assurance from this regulatory agency that the effluent standards will 
not be exceeded by the individual systems being proposed must be 
included.
    (2) Program of maintenance, parts, and service available to the 
system-owner for upkeep of the system.
    (3) A plan for local inspection of the system by a responsible 
agency with the authority to ensure compliance with health and safety 
standards.
    (b) Electric service. The power supplier will be consulted by the 
applicant to assure that there is adequate service available to meet the 
needs of the proposed site. Underground service is preferred.
    (c) Gas service. Gas distribution facilities, if provided, will be 
installed according to local requirements where adequate and dependable 
gas service is available.
    (d) Other utilities. Other utilities, if available, will be 
installed according to local requirements.



Sec. 1924.108  Grading and drainage.

    (a) General. Soil and geologic conditions must be suitable for the 
type of

[[Page 168]]

construction proposed. In questionable or unsurveyed areas, the 
applicant or developer will provide an engineering report with 
supporting data sufficient to identify all pertinent subsurface 
conditions which could adversely affect the structure and show proposed 
solutions. Grading will promote drainage of surface water away from 
buildings and foundations, minimize earth settlement and erosion, and 
assure that drainage from adjacent properties onto the development or 
from the development to adjacent properties does not create a health 
hazard or other undesirable conditions. Grading and drainage will comply 
with exhibit B, paragraphs III and IV, of this subpart.
    (b) Cuts and fills. Development requiring extensive earthwork, cuts 
and fills of 4 feet or more shall be designed by a professional 
engineer. Where topography requires fills or extensive earthwork that 
must support structures and building foundations, these must be 
controlled fills designed, supervised, and tested by a qualified soils 
engineer.
    (c) Slope protection. All slopes must be protected from erosion by 
planting or other means. Slopes may require temporary cover if exposed 
for long periods during construction.
    (d) Storm water systems. The design of storm water systems must 
consider convenience and property protection both at the individual site 
level and the drainage basin level. Storm water systems should be 
compatible with the natural features of the site. In areas with 
inadequate drainage systems, permanent or temporary storm water storage 
shall be an integral part of the overall development plan. Design of 
these facilities shall consider safety, appearance, and economical 
maintenance operations.



Secs. 1924.109-1924.114  [Reserved]



Sec. 1924.115  Single Family Housing site evaluation.

    (a) Site review. The site approval official will evaluate each site 
(developed or undeveloped) to determine acceptance for the program. 
Information on the site will be provided by the appraiser or site 
approval official on a form provided by RHS and available in any RHS 
field office.
    (b) Site access. Each site must be contiguous to and have direct 
access from:
    (1) A hard surfaced or all weather road which is developed in full 
compliance with public body requirements, is dedicated for public use, 
and is being maintained by a public body or a home owners association 
that has demonstrated its ability or can clearly demonstrate its ability 
to maintain the street; or
    (2) An all weather extended driveway which can serve no more than 
two sites connecting to a hard surface or all weather street or road 
that meets the requirements of paragraph (b)(1); or
    (3) A hard surfaced street in a condominium or townhouse complex 
which:
    (i) Is owned in common by the members or a member association and is 
maintained by a member association that has demonstrated its ability or 
can clearly demonstrate its ability to maintain the street; and
    (ii) Connects to a publicly owned and dedicated street or road.
    (c) Exceptions to street requirements. A site not meeting the 
conditions in paragraph (b) of this section will be acceptable if:
    (1) The applicant is a builder for a conditional commitment (a loan 
will not be approved until the site meets the conditions in paragraph 
(b) of this section), or the builder posts an irrevocable performance 
and payment bond (or similar acceptable assurance) that assures the site 
approval official that the site will be developed to meet the conditions 
in paragraph (b) of this section; or
    (2) The site is recommended by the site approval official and 
approved by the state director. A request for state director approval 
must justify that it is in the best interest of both the government and 
the applicant to approve the site.
    (d) Site layout. (1) Sites shall be surveyed and platted. Permanent 
markers shall be placed at all corners.
    (2) Sites shall meet all requirements of state and local entities 
and RHS.
    (e) Covenants, conditions and restrictions. Sites in subdivisions 
shall be protected by covenants, conditions, and restrictions (CC&Rs) to 
preserve the

[[Page 169]]

character, value, and amenities of the residential community and to 
avoid or mitigate potential environmental impacts unless, an exception 
is granted by RHS after considering the suitability of local ordinances, 
zoning, and other land use controls.
    (1) CC&Rs shall be recorded in the public land records and 
specifically referenced in each deed.
    (2) The intent of the CC&Rs is to assure the developers that the 
purchasers will use the land in conformance with the planned objectives 
for the community. In addition, the CC&Rs should assure the purchasers 
that the land covered by the CC&Rs will be used as planned and that 
other purchasers will use and maintain the land as planned to prevent 
changes in the character of the neighborhood that would adversely impact 
values or create a nuisance.



Secs. 1924.116-1924.118  [Reserved]



Sec. 1924.119  Site Loans.

    Subdivisions approved under subpart G of part 1822 (FmHA Instruction 
444.8) or exhibit F of subpart I of part 1944 (available in any RHS 
field office), will meet the general requirements of this subpart to 
insure lots in the subdivision will meet the requirements of 
Sec. 1924.115.



Secs. 1924.120-1924.121  [Reserved]



Sec. 1924.122  Exception authority.

    The Administrator of RHS may in individual cases, make an exception 
to any requirement or provision of this subpart or address any omission 
of this subpart which is not inconsistent with the authorizing statute 
or other applicable law if the Administrator determines that application 
of the requirement or provision would adversely affect the Government's 
interest. The Administrator will exercise this authority upon the 
written request of the state director or the appropriate program 
assistant administrator. Requests for exceptions must be supported with 
documentation to explain the adverse effect on the Government, proposed 
alternative courses of action, and show how the adverse effect will be 
eliminated or minimized if the exception is granted.



Secs. 1924.123-1924.149  [Reserved]



Sec. 1924.150  OMB Control Number.

    The reporting requirements contained in this subpart have been 
approved by the Office of Management and Budget (OMB) and have been 
assigned OMB control number 0575-0164. Public reporting burden for this 
collection of information is estimated to vary from 5 minutes to 10 
minutes per response, with an average of .13 hours per response, 
including time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information. Send comments regarding this 
burden estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden to the Department of 
Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, DC 20250; 
and to the Office of Management and Budget, Paperwork Reduction Project 
(OMB 0575-0164), Washington, DC 20503.

             Exhibit A to Subpart C of Part 1924 [Reserved]

      Exhibit B to Subpart C of Part 1924--Site Development Design 
                              Requirements

    This exhibit prescribes site development requirements to be used in 
developing residential sites in all housing programs. These requirements 
cover only those areas which involve health and safety concerns. They 
are not intended to cover all aspects of site development. Applicants 
and developers are expected to follow local practice, as a minimum, in 
all areas of site development not addressed in this exhibit. When State, 
local, or other requirements are applicable in addition to FmHA or its 
successor agency under Public Law 103-354's requirements, the most 
stringent requirement shall apply.
    Proper integration of the natural features of a site with the 
manmade improvements is one of the most critical aspects of residential 
development. Poor site planning in large scale subdivisions, rental 
projects and individual sites, has resulted in a loss of valuable 
private and public natural resources and caused economic burdens and 
conditions unsuitable for healthy and pleasant living. Proper site 
design can preserve desirable natural features of the site, minimize 
expenses for streets and utilities, and provide a safe and pleasant 
living environment.

[[Page 170]]

                            Table of Contents

                               I. Streets

A. Types
    1. Collector Streets
    2. Local Streets
B. Design Features
    1. Emergency Access
    2. Cul-de-sacs
    3. Intersection Angle
    4. Intersection Sight Distance
C. Street Geometry
    1. Definitions
    2. Design Requirements
D. Construction

                           II. Walks and Steps

A. Walks
B. Exterior Steps Not Contiguous to Dwelling or Building
    1. Flight
    2. Risers and Treads
    3. Landings
    4. Handrails

                              III. Grading

A. Compaction
B. Gradients

                              IV. Drainage

A. General
    1. Collection and Disposal
    2. Concentrated Flow
B. Drainage Design and Flood Hazard Exposure
    1. Storm Frequences
    2. Street Drainage
    3. Foundation Drainage
C. Primary Storm Sewer
    1. Pipe Size
    2. Minimum Gradient
    3. Easements
D. Drainage Swals and Gutters
    1. Design
    2. Easements
E. Downspouts
    1. Outfall
    2. Piped Drainage
F. Storm Inlets and Catch Basins
    1. Openings
    2. Access
G. Drywells

                         V. Water Supply Systems

A. Individual Water Systems
    1. General
    2. Well Location
    3. Well Construction
    4. Pumps and Equipment
    5. Storage Tanks
B. Community Water Systems
    1. Definition
    2. Design

                     VI. Wastewater Disposal Systems

A. Individual Wastewater Disposal Systems
    1. General
    2. Percolation Tests
    3. Subsurface Absorption Systems
B. Community Wastewater Disposal Systems
    1. Definition
    2. Design

                               I. Streets

    A. Types--1. Collector streets. Collector streets are feeder streets 
which carry traffic from local streets to the major system of arterial 
streets and highways. They include the principal entrance streets of 
residential developments and streets for circulation within such 
developments.
    2. Local streets. Local streets are minor streets used primarily for 
access to abutting properties. These include drives serving multi-family 
housing units.
    B. Design Features--1. Emergency Access. Access for fire equipment 
and other emergency vehicles shall be within 100 feet of main building 
entrances.
    2. Cul-de-sacs. Cul-de-sac streets shall have a turn-around with an 
outside roadway diameter of at least 80 feet, and a right-of-way 
diameter of at least 100 feet.
    3. Intersection Angle. Streets shall be laid out to intersect as 
nearly as possible at right angles and no street shall intersect any 
other street at an angle less than 75 degrees. Curb radii shall be a 
minimum of 20 feet for street intersections.

[[Page 171]]

[GRAPHIC] [TIFF OMITTED] TC22SE91.000

    4. Intersection Sight Distance. Adequate distances must be 
maintained at intersections. Vehicles must be visible when within 75 
feet of the centerlines of uncontrolled intersecting streets.
    C. Street Geometry--1. Definitions. The definitions in Sections 
I.C.1.a and I.C.1.b. apply to the requirements in Section I.C.2.
    a. Terrain Classifications.
    (1) Ordinary--Slope less than 8%.
    (2) Rolling--Slope range of 8% to 15%.
    (3) Hilly--Slope greater than 15%.
    b. Development Density (Number of Lots). (Land Area minus 
Undeveloped Areas greater than Average Lot Size)
    (1) Low--Less than 2 lots per acre.
    (2) Medium--2 to 6.0 lots per acre.
    (3) High-More than six lots per acre.
    2. Design Requirements. Collector streets and local streets shall 
comply with the requirements in tables 1 and 2 unless an exception is 
granted by the State Director. These requirements may need modification 
in localities having winter icing conditions.

                                         Table 1--Pavement Widths (feet)
----------------------------------------------------------------------------------------------------------------
                                                                                       Development density
                Street type                      On-street parallel parking     --------------------------------
                                                                                    Low       Medium      High
----------------------------------------------------------------------------------------------------------------
Collector..................................  Prohibited........................         26         32         36
Collector..................................  No Restrictions...................         36         36         40
Local......................................  Prohibited........................         18         18         20
Local......................................  Partial, One Side \1\.............         18         20         26
Local......................................  Partial, One Side \1\.............         22         26         32
Local......................................  Total, One Side \2\...............         22         26         26
Local......................................  Total, Both Sides \2\.............         26         32         36
----------------------------------------------------------------------------------------------------------------
(\1\) At least one parking space per dwelling is provided off-street.
(\2\) No parking spaces are provided off-street.


                      Table 2--Street Design (feet)
------------------------------------------------------------------------
                                                     Terrain
                                        --------------------------------
                                          Ordinary   Rolling     Hilly
------------------------------------------------------------------------
(1) Collector street:
  (a) Minimum centerline radius of             300        225        150
   curvature...........................
  (b) Minimum sight distance...........        250        200        150
  (c) Minimum right-of-way width.......         60         60         60
(2) Local Street:
  (a) Minimum centerline radius of             200        150        100
   curvature...........................
  (b) Minimum sight distance...........        200        150        100
  (c) Minimum right-of-way width \1\...         50         50         50
------------------------------------------------------------------------
(\1\) For cul-de-sac streets, the minimum right-of-way width is 40 feet.

    D. Construction. Street configuration and wearing surfaces must 
provide safe and economical access to all building sites. The design and 
construction of the street shall be appropriate for all anticipated 
traffic, climatic and soil conditions. Streets shall meet or exceed all 
local, county, and State requirements.

[[Page 172]]

                           II. Walks and Steps

    A. Walks. Where walks are provided, they shall be located to assure 
a minimum vertical clearance of 7 feet from all permanent or temporary 
obstructions. Walks shall have a slip resistant surface.
    B. Exterior Steps Not Contiguous to Dwelling or Building--1. Flight. 
a. Single steps or flights of steps exceeding a vertical height of 12 
feet shall not be accepted.
    b. Steps shall be set back from an intersecting walk or drive a 
minimum of 1 foot at a retaining wall and 2 feet at slopes.
    2. Risers and Treads. a. Risers shall be a maximum of 6 inches, a 
minimum of 3 inches and uniform throughout the flight.
    b. Treads shall be a minimum of 12 inches and uniform throughout the 
flight.
    c. Treads shall have a slip resistant surface.
    d. Treads shall be pitched appropriately to ensure drainage.
    3. Landings. a. Minimum length shall equal 3 feet or walk width 
whichever is greater.
    b. A change in direction in a flight of stairs shall be accomplished 
only at a landing or by a winder which has a tread width at a point 18 
inches from the converging end, equal to the full straight stair tread 
width.
    4. Handrails. Stairways having a flight rise exceeding 30 inches 
shall have a 36 inch high handrail located on one side for stairs 5 feet 
or less in width and on both sides of stairways over 5 feet wide.

                              III. Grading

    A. Compaction-- All fill for street or home construction shall have 
compaction of not less than 95 percent maximum density, as determined by 
proctor or other accepted testing methods. Maximum thickness of 
compaction layers shall be 6 inches except where compaction equipment of 
demonstrated capability is used under the direction of a qualified soils 
engineer. Earth fill used to support a building foundation shall be a 
controlled fill which is designed, supervised, and tested by a qualified 
soils engineer in accordance with good practice.
    B. Gradients. Grading design shall be arranged to assure safe and 
convenient all-weather pedestrian and vehicular access to residential 
buildings and to all other necessary site facilities. Site grading shall 
be designed to establish building floor elevations and ground surface 
grades which allow drainage of surface water away from buildings and 
adjacent sites. Grading design shall conform with tables 3 and 4.

                Table 3--Access and Parking Gradients \1\
                              [In percent]
------------------------------------------------------------------------
                                     Minimum               Maximum
                             -------------------------------------------
                                          Crown or              Crown or
                                Center     cross      Center     cross
                                 line      slope       line      slope
------------------------------------------------------------------------
Streets.....................        0.5        1.0       14.0        5.0
Street Intersections........        0.5        1.0     \2\5.0        5.0
Driveways (\3\).............        .05        1.0       14.0        5.0
Sidewalks (\4\):
    Concrete................                   0.5
    Bituminous..............                   1.0
    Building Entrances &            1.0                  12.0        5.0
     Short Walks............
    Main Walks..............        0.5                  10.0        5.0
    Adjoining Steps.........                              2.0
    Landings................                   1.0
    Stepped Ramp Treads.....        1.0                   2.0        5.0
Parking.....................                   0.5        5.0        5.0
------------------------------------------------------------------------
\1\ Approximate Equivalents .5%=\1/16\ ft., 1.0=\1/8\ ft., 2.0%=\1/4\ ft., 5.0%=\5/8\ ft.,
  10.0%=1\1/4\ ft., 12.0%=1\1/2\ ft., 21%=2\5/
  8\ ft.
\2\ Grades approaching intersections shall not exceed 5 percent for a
  distance of not less than 100 feet from the centerline of the
  intersection.
\3\ Vertical transitions shall percent contact of car undercarriage of
  bumper with driveway surface.
\4\ Five percent maximum for major use by elderly tenants.


                      Table 4--Slope Gradients \1\
                              [In percent]
------------------------------------------------------------------------
                                                     Minimum    Maximum
------------------------------------------------------------------------
           Slope Away From Foundations:
    Pervious Surfaces.............................    \2\ 5.0   \3\ 21.0
    Impervious Surfaces...........................     \2\1.0       21.0
                Pervious Surfaces:
    Ground Frost Area.............................        2.0
    Non-Ground Frost Areas........................     \4\1.0
Impervious Surfaces...............................        0.5

[[Page 173]]

 
Slopes to be maintained by Machine................               \3\33.0
------------------------------------------------------------------------
\1\ See table 3, footnote (1).
\2\ Minimum length of 10 feet or as limited by property lines.
\3\ Minimum length of 4 feet.
\4\ The minimum is 2.0% if the annual precipitation is more than 50
  inches.

                              IV. Drainage

    A. General--1. Collection and Disposal. Surface and subsurface 
drainage systems shall be provided, as appropriate, for collection and 
disposal of storm drainage and subsurface water. These systems shall 
provide for the safety and convenience of occupants. They shall protect 
dwellings, other improvements and useable lot areas from water damage, 
flooding, and erosion.
    2. Concentrated Flow. Where storm drainage flow is concentrated, 
permanently maintained facilities shall be provided to prevent 
significant erosion and other damage or flooding on site or on adjacent 
properties.
    B. Drainage Design and Flood Hazard Exposure--1. Storm Frequency. 
Drainage facilities shall be designed for a 10 year storm frequency of 
24-hour duration. Full potential development of all contributing areas 
shall be used as a basis for this determination.
    2. Street Drainage. Streets shall be useable during runoff 
equivalent to a 10-year return frequency. Where drainage outfall is 
inadequate to prevent runoff equivalent to a 10-year return frequency 
from ponding over 6 inches deep, streets shall be made passable for 
local commonly used emergency vehicles during runoff equivalent to a 25-
year return frequency except where an alternative access street not 
subject to such ponding is available.
    3. Foundation Drainage. Appropriate crawl space and foundation 
drainage shall be provided for the removal of subsurface moisture.
    C. Primary Storm Sewer--1. Pipe Size. Pipe size for the primary 
storm sewer (any storm sewer or inlet lateral located in a street or 
other public right-of-way) shall have an inside diameter based on design 
analysis but not less than 15 inches. Where anticipated runoff from the 
five-year return frequency rainfall will not fill a 15 inch pipe, a 
primary storm sewer system usually is unnecessary.
    2. Minimum Gradient. Minimum gradient shall be selected to provide 
for self-scouring of the conduit under low-flow conditions and for 
removal of sediments foreseeable from the drainage area.
    3. Easements. Easements for storm sewers shall be a minimum of 10 
feet in width.
    D. Drainage Swals and Gutters--1. Design. Paved gutters shall have a 
minimum grade of 0.5 percent. Paved gutters and unpaved drainage swales 
shall have adequate depth and width to accommodate the maximum 
foreseeable runoff without overflow. Swales and gutters shall be seeded, 
sodded, sprigged or paved as appropriate to minimize potential erosion. 
Side slopes shall be no steeper than 2:1.
    2. Easements. Surface channels shall have an easement which is at 
least the width of the channel plus 10 feet.
    E. Downspouts--1. Outfall. Where downspouts are provided, they shall 
either be connected to an available storm sewer, provided with suitable 
splash blocks, or empty at acceptable locations onto paved areas so that 
water drains away from buildings. Downspouts shall not connect to 
sanitary sewers.
    2. Piped Drainage. Piped roof drainage from buildings shall be 
connected to available storm sewers or empty at locations where no 
erosion or other damage will be caused.
    F. Storm Inlets and Catch Basins--1. Openings. Where inlets are 
accessible to small children, openings shall have one dimension limited 
to 6 inch access. Inlet openings in paved areas shall be designed to 
avoid entrapment or impedence of bicycles, baby carriages, etc.
    2. Access. Access for cleaning shall be provided to all inlet boxes 
and catch basins.
    G. Drywells--Drywells for the disposal of water from foundation 
drains, crawl spaces, and other small quantity sources shall be 
permissible where the bottom of drywells project into strata of 
undistributed porous soil at a level where the bottom of the drywell 
will be above the ground water table at its highest seasonal elevation.

                         V. Water Supply Systems

    A. Individual Water Systems--1. General. a. In this subpart, an 
individual water system is a system which serves fewer customers or 
connections than the lower threshold for community systems stated in the 
Safe Drinking Water Act.
    b. The system for an individual household should be capable of 
delivering a sustained flow of 5 gpm. A system supplying water to 
multiple household shall be designed by a Professional Engineer and have 
sufficient capacity to serve estimated demand. A test of at least 4 
hours duration shall be conducted to determine the yield and maximum 
drawdown for all wells developed as part of an individual water system. 
This test may be

[[Page 174]]

waived by the State Office based on the hydrologic and geologic 
conditions in the area.
    c. Water that requires continual or repetitive treatment to be safe 
bacterially is not acceptable.
    d. After installation, the system should be disinfected in 
accordance with the recommendations of the health authority. In the 
absence of a health authority, system cleaning and disinfection should 
conform with the current EPA Manual of Individual Water Supply Systems.
    e. Any method for individual water supply contained herein which is 
not permitted by the local health authority having jurisdiction shall 
not be used.
    2. Well Location-- a. A well located within the foundation walls of 
a dwelling is not acceptable except in arctic and sub-arctic regions.
    b. Water which comes from soil formation which may be polluted or 
contaminated or is fissured or creviced or which is less than 20 feet 
below the natural ground surface (subject to the requirements of the 
local health authority) is not acceptable.
    c. Individual water supply systems are not acceptable for individual 
lots in areas where chemical soil poisoning is practiced if the 
overburden of soil between the ground surface and the water bearing 
strata is coarse-grained sand, gravel, or porous rock, or is creviced in 
a manner which will permit the recharge water to carry the toxicants 
into the zone of saturation.
    d. Table 5 shall be used in establishing the minimum acceptable 
distances between wells and sources of pollution located on either the 
same or adjoining lots. These distances may be increased by either the 
health authority having jurisdiction or the FmHA or its successor agency 
under Public Law 103-354 State Director.

               Table 5--Distance From Source of Pollution
------------------------------------------------------------------------
                                                               Minimum
                                                              horizontal
                    Source of pollution                        distance
                                                                (feet)
------------------------------------------------------------------------
Property Line..............................................           10
Septic Tank................................................           50
Absorption field...........................................       \1\100
Seepage pit................................................       \1\100
Absorption Bed.............................................       \1\100
Sewer Lines w/Permanent Watertight Joints..................           10
Other Sewer Lines..........................................           50
Chemically Poisoned Soil...................................       \1\100
Dry Well...................................................           50
Other......................................................      (\2\)--
------------------------------------------------------------------------
Notes:
\1\ The horizontal distance between the sewage absorption system and the
  well, or the chemically poisoned soil and the well, may be reduced to
  50 feet only where the ground surface is effectively separated from
  the water bearing formation by an extensive, continuous impervious
  strata of clay, hard-pan, or rock. The well shall be constructed so as
  to prevent the entrance of surface water and contaminants.
\2\ Other sources of pollution could be fuel oil or gasoline storage
  tanks, farm yards or chemical storage tanks, etc. The well should be
  separated from these sources of pollution a distance recommended by
  the local health authority.

    3. Well Construction-- a. The well shall be constructed to allow the 
pump to be easily placed and to function properly.
    b. All drilled wells shall be provided with a sound, durable and 
watertight casing capable of sustaining the loads imposed. The casing 
shall extend from a point several feet below the water level at drawdown 
or from an impervious strata above the water level, to 12 inches above 
either the ground surface or the pump room floor. The casing shall be 
sealed at the upper opening.
    c. Bored wells shall be lined with concrete, vitrified clay, or 
equivalent materials.
    d. The space between the casing or liner and the wall of the well 
hole shall be sealed with cement grout.
    e. The well casing shall not be used to convey water except under 
positive pressure. A separate drop pipe shall be used for suction line.
    f. When sand or silt is encountered in the water-bearing formation, 
the well shall either be gravel packed, or a removable strainer or 
screen shall be installed.
    g. The surface of the ground above and around the well shall be 
graded to drain surface water away from the well.
    h. Openings in the casing, cap, or concrete cover for the entrance 
of pipes, pump or manholes, shall be made watertight.
    i. If a breather is provided, it shall extend above the highest 
level to which surface water may rise. The breather shall be watertight, 
and the open end shall be screened and positioned to prevent entry of 
dust, insects and foregin objects.
    4. Pumps and Equipment-- a. Pumps shall be capable of delivering the 
volume of water required herein under normal operating pressures within 
the living unit. Well pump capacity shall not exceed the output of the 
well.
    b. Pumps and equipment shall be mounted to be free of objectionable 
noises, vibrations, flooding, pollution, and freezing.
    c. Suction lines shall terminate below maximum drawdown of the water 
level in the well.
    d. Horizontal segments of suction line shall be placed below the 
frost line in a sealed casing pipe or in at least 4 inches of concrete. 
The distance from suction line to sources of pollution shall be not less 
than shown in table 5.
    5. Storage Tanks-- a. A system for an individual household shall 
include a pressure tank having a minimum capacity of 42-gallons. 
However, prepressured tanks and other pressurizing devices are 
acceptable provided that delivery between pump cycles equals or exceeds 
that of a 42 gallon tank. Storage capacity on a system for multiple 
households

[[Page 175]]

must be sufficient to meet estimated peak demands.
    b. Tanks shall be equipped with a clean-out plug at the lowest 
point, and if pressurized, a suitable pressure relief valve.
    c. When additional storage is necessary because the well yield will 
not meet the system peak demands, all nonpressurized intermediate tanks 
shall be designed and installed in a manner that will prevent the 
pollution or degradation of the water supply.
    B. Community Water Systems--1. Definition. In this subpart, a 
community water system is a system which meets the definition in the 
Safe Drinking Water Act.
    2. Design. A community water system shall be designed by a 
qualified, professional engineer licensed in the state in which the 
water system will be located. Community water systems shall comply with 
all Federal and State laws.

                     VI. Wastewater Disposal Systems

    Each dwelling shall be provided with a water-carried system adequate 
to dispose of domestic wastes in a manner which will not create a 
nuisance, contaminate any existing or prospective water source or water 
supply, or in any way endanger the public health.
    A. Individual Wastewater Disposal Systems--1. General. a. In this 
subpart, an individual wastewater disposal system is a sewage disposal 
system which serves only 1 dwelling unit.
    b. When service from an acceptable public or community system is not 
available or feasible, and ground water and soil conditions are 
acceptable, an individual system may be used.
    c. Each individual wastewater disposal system shall consist of a 
house sewer, a pretreatment unit (e.g., septic tank, individual package 
treatment plant), and acceptable absorption system (subsurface 
absorption field, seepage pit(s), or subsurface absorption bed). The 
system shall be designed to receive all sanitary sewage (bathrooms, 
kitchen and laundry) from the dwelling, but not footing or roof 
drainage. It shall be designed so that gases generated anywhere in the 
system can easily flow back to the building sewer stack.
    2. Percolation Tests-- a. Percolation tests are required unless a 
waiver is granted by the National Office. Waivers may be granted on a 
statewide or local basis in cases where an onsite evaluation of soils 
would be performed by a qualified soil technician, soil scientist, or 
engineer. Requests for waivers must describe the qualifications of the 
person evaluating the soils and discuss the criteria to be used in 
designing the absorption system.
    b. In uniform soils one percolation test shall be made within each 
area proposed for an absorption system. If significant soil variations 
are encountered or expected, additional tests shall be made for each 
variation.
    c. Percolation tests shall be conducted in accordance with good 
practice. Guidance for performing these tests is included in the EPA 
design manual, ``Onsite Wastewater Treatment and Disposal Systems.''
    3. Subsurface Absorption System-- a. Where percolation rates, soil 
characteristics and site conditions are acceptable, an absorption system 
may be installed in an area which is well drained, has an acceptable 
slope, and is acceptable for excavation.
    b. Soils with percolation rates less than 1 minute per inch may be 
used if the soil is replaced with a layer of loamy or fine sand at least 
2 feet thick. (Refer to the EPA Design Manual, ``Onsite Wastewater 
Treatment and Disposal System''.)
    c. Soils with percolation rates greater than 60 minutes per inch are 
not acceptable for subsurface wastewater disposal systems.
    B. Community Wastewater Disposal Systems--1. Definition. In this 
subpart, a community wastewater disposal system is any wastewater 
disposal system which serves more than 1 dwelling unit.
    2. Design. A community wastewater disposal system shall be designed 
by a qualified, professional engineer licensed in the state in which the 
system will be located.

[52 FR 19284, May 22, 1987]

 Exhibit C to Subpart C of Part 1924--Checklist of Visual Exhibits and 
              Documentation for RRH, RCH, and LH Proposals

                     U.S. Department of Agriculture

  Farmers Home Administration or its successor agency under Public Law 
                                 103-354

    This exhibit lists visual exhibits and documentation necessary for 
FmHA or its successor agency under Public Law 103-354 to properly 
evaluate proposed development. Intermediate consultation by the 
applicant, builder-developer and others hereafter referred to as the 
sponsor with the FmHA or its successor agency under Public Law 103-354 
District or State Offices should be as frequent as necessary to reduce 
chances of misunderstandings and limit the amount of non-productive time 
and expense for all parties concerned.
    I. Preapplication Submission Documents: The sponsor will submit the 
following information to the District Director to determine feasibility 
of the project and general conformance with FmHA or its successor agency 
under Public Law 103-354 policy:
    A. Form 1940-20, ``Request for Environmental Information.'' Portions 
of the form must be completed when the submission contains more than 4 
dwelling units and the entire

[[Page 176]]

form must be completed when the submission contains more than 25 
dwelling units. The form and guidance concerning assembly of the 
information is available at any FmHA or its successor agency under 
Public Law 103-354 office.
    B. Location Map. A general site location map of the area indicating 
the adjacent land zoning and uses, the present and future access roads 
to the site as well as the proximity to shopping, schools, churches, and 
major transportation facilities with note of traffic volumes. If a 
satisfactory map of the locality is not available, a clear and 
preferably scaled rough sketch map that provides the required 
information will be sufficient.
    C. Property Survey Map. A current survey map of the project site 
showing the boundaries as well as all existing known features 
specifically including utilities, easements, access roads, floodplains, 
drainageways, rock outcroppings and wooded areas or specimen trees. If a 
current survey does not exist, the most accurate document which is 
available will be submitted.
    D. Soils Map and Report. A complete soils map and report, including 
``site specific'' interpretations and recommendations, from the local or 
county representative of the U.S. Department of Agriculture, Soil 
Conservation Service (SCS) Office will be included with the location and 
feasibility submission. A determination of whether or not any lands 
described in USDA Regulation 9500-3 are impacted by the proposed 
development should also be included. The local SCS office may provide 
recommendations for the development of suitable drainage and landscaping 
plans later in the planning process.
    E. Market survey. A market survey will be submitted in accordance 
with the requirements of the respective loan program as indicated in 
part 1944, subparts D and E of this chapter.
    F. Request for Exceptions. Any need for State or National Office 
exception(s) should be identified at this stage in the processing. 
Appropriate exception(s) should be requested and obtained before 
proceeding to the preliminary submission.
    G. Other. The applicant will need to submit any additional 
information that may be needed as indicated in subpart D or exhibit A-7 
of subpart E of part 1944 of this chapter. This may include but is not 
limited to:
    1. Schematic design drawings showing the proposed plot plan, typical 
unit plans, and elevations. If available, the proposed preliminary 
drawings and specifications may be submitted. This would be of 
assistance if it is determined that the loan must receive National 
Office authorization.
    2. Type of construction.
    3. The total number of living units and the number of each type of 
living unit proposed.
    4. Type of utilities such as water, sewer, gas, and electricity and 
whether each is public, community, or individually owned.
    II. Application Submission Documents: After it is determined by FmHA 
or its successor agency under Public Law 103-354 that the project is 
feasible and the location conforms with the intent of the funding 
program, the sponsor will submit the following information to the 
District Director in addition to those materials submitted previously.
    A. Property Survey. A survey (where 1 inch represents no more than 
100 feet) of the property lot showing the exact boundaries and corners 
of the property accompanied by a written description of said boundaries. 
Also, locations of predominant features such as utilities, easements, 
access points, floodplains, drainageways, rock outcroppings and wooded 
areas or specimen trees affecting the proposed development must be 
included. This document shall bear the seal of a professional licensed 
to provide surveying services in the State in which the project will be 
located. This survey could be a part of item D below.
    B. Topographic Map. An accurate topographic map showing existing and 
proposed contours with a scale compatible with the size of the project. 
The site shall be shown at a reasonable scale with 5-foot contour 
intervals. Where the site is unusually level or steep, the contour 
intervals may be varied accordingly.
    C. Preliminary Site Plan. A line drawing, to scale, showing proposed 
street locations with profiles and widths, lot layouts, major 
drainageways, and other development planned. Preliminary sections and 
details shall be provided for the street construction, curbs and 
gutters, drainageways, and other physical improvements.
    D. Preliminary Dwelling Drawings and Specifications. Drawings of the 
dwelling units, preliminary floor plans and specifications, elevations 
and sample site plans showing the placement of the individual buildings 
should be submitted.
    E. Statement of Planning and Zoning Compliance. Local, county and 
State approvals as applicable. If change of zoning or variance is 
required, the status of the variance or change of zoning shall be 
documented.
    F. Technical Service Contracts. Executed contracts for the 
professional services of an architect, engineer, land surveyor, 
landscape architect, site planner and/or soil engineer will be submitted 
as appropriate for the planning of the proposed development.
    G. Utility Approvals. Statements of approval and feasibility for 
utility systems as follows:
    1. Verification of adequate capacity and approval to tie-in with 
local existing water, wastewater disposal, electric, telephone, and 
other utility systems, as appropriate.

[[Page 177]]

    2. Tentative approval of local or State health authority for 
individual water and/or wastewater disposal systems when it is clear 
that central systems are unfeasible at this time. Use 
Sec. 1924.108(a)(5) of this subpart when preparing information required.
    H. Facility Acceptance. Evidence that the appropriate public body is 
willing to accept and maintain streets, common areas, lighting, fire 
hydrants, sidewalks, drainageways, and utilities, as appropriate, when 
dedicated to said body.
    I. Preliminary Specifications. Outline specifications describing all 
the proposed materials to be used and how they are to be applied. These 
are only the materials used in the land development and construction of 
the streets, drainage, and utility work.
    J. Incremental Slopes Plan. If areas of common slope are not 
identified elsewhere in adequate detail, this information should be 
provided in a separate plan.
    K. Preliminary Grading Plan. This plan will indicate degree of work 
required to provide positive drainage of all building sites and control 
measures to be taken to eliminate soil erosion. Dwelling locations may 
be shown if they can be predetermined.
    L. Other. The applicant will need to submit any additional 
information that may be needed as indicated in the respective loan 
program regulations as indicated in part 1944, subparts D and E and part 
1822, subpart F of this chapter (FmHA or its successor agency under 
Public Law 103-354 Instruction 444.7). This may include but not be 
limited to:
    1. A detailed trade-item cost breakdown of the project for such 
items as land and right-of-way, building construction, equipment, 
utility connections, architectural/engineering and legal fees, and both 
on- and off-site improvements. The cost breakdown also should show 
separately the items not included in the loan, such as furnishings and 
equipment. This trade-item cost breakdown should be updated just prior 
to loan approval.
    2. Information on the method of construction, on the proposed 
contractor if a construction contract is to be negotiated and on the 
architectural, engineering, and legal services to be provided.
    3. For all projects containing over four units the applicant will 
submit an Affirmative Fair Housing Marketing Plan for approval by FmHA 
or its successor agency under Public Law 103-354 in accordance with 
Sec. 1901.203 of subpart E to part 1901 of this chapter. The Affirmative 
Fair Housing Marketing Plan must be prepared in a complete, meaningful, 
responsive and detailed manner.
    4. A description and justification of any related facilities 
(including but not limited to workshops, community buildings, recreation 
center, central cooking and dining facilities, or other similar 
facilities to meet essential needs) to be financed wholly or in part 
with loan funds.
    III. Technical Documents Necessary for the Obligation of Funds. All 
decisions regarding the conceptual design of the proposed project should 
be made prior to this submission. This effort is mainly to demonstrate 
that those agreed upon concepts have been transformed into construction 
documents and the necessary approvals have been granted. All items 
requiring revision or more detailed information as determined by the 
review of the preliminary submission will be resolved before the sponsor 
prepares the final submission. All documents shall be executed in a 
professional manner and shall carry the appropriate designation 
attesting to the professional qualifications of the architect, engineer, 
land surveyor or site planner. All documents will be accurately drawn at 
an appropriate scale.

[52 FR 19284, May 22, 1987, as amended at 56 FR 2202, Jan. 22, 1991]

Subparts D-E [Reserved]



     Subpart F--Complaints and Compensation for Construction Defects

    Source: 56 FR 40241, Aug. 14, 1991, unless otherwise noted.



Sec. 1924.251  Purpose.

    This subpart contains policies and procedures for receiving and 
resolving complaints concerning the construction of dwellings and 
construction, installation and set-up of manufactured homes (herein 
called ``units''), financed by the Farmers Home Administration (FmHA)or 
its successor agency under Public Law 103-354, and for compensating 
borrowers for structural defects under section 509(c) of the Housing Act 
of 1949, as amended. Provisions of this subpart do not apply to 
dwellings financed with guaranteed section 502 loans.



Sec. 1924.252  Policy.

    FmHA or its successor agency under Public Law 103-354 is responsible 
for receiving and resolving all complaints concerning the construction 
of dwellings and the construction, installation and set-up of units 
financed by FmHA or its successor agency under Public Law 103-354. FmHA 
or its successor agency under Public Law 103-354 must

[[Page 178]]

determine whether defects are structural or non-structural. If the 
defect is structural and is covered by the builder's/dealer-contractor's 
(the ``contractor'') warranty, the contractor is expected to correct the 
defect. If the contractor cannot or will not correct the defect, the 
costs of correcting the defect may be paid by the Government, or the 
borrower may be compensated for correcting the defect, under the 
provisions of this subpart. If the defect is non-structural but is 
covered under the provisions of the contractor's warranty or independent 
home warranty, the contractor is still expected to correct the defect. 
FmHA or its successor agency under Public Law 103-354 will assist the 
borrower in obtaining assistance through the independent home warranty 
company's and/or manufacturer's complaint resolution process. However, 
if the contractor cannot or will not correct a non-structural defect 
covered under the provisions of the contractor's warranty, the 
Government will not pay the costs for correcting the defect, nor will 
the borrower be compensated for doing so.



Sec. 1924.253  Definitions.

    As used in this subpart, the following definitions apply:
    (a) Newly constructed dwelling. One which:
    (1) Is financed with a section 502 insured loan;
    (2) Was constructed substantially or wholly under the contract 
method, or under a conditional commitment, or, as to only work performed 
by a contractor or covered by a manufacturer's warranty, under the 
mutual self-help program;
    (3) Was not more than one year old and not previously occupied as a 
residence at the time financial assistance was granted unless FmHA or 
its successor agency under Public Law 103-354 has extended the 
conditional commitment issued on a newly constructed dwelling in 
accordance with subpart A of part 1944 of this chapter; and
    (4) Had the required construction inspections performed by FmHA or 
its successor agency under Public Law 103-354, the Department of Housing 
and Urban Development (HUD), or the Veterans Administration (VA).
    (b) Newly constructed manufactured home (unit). One which:
    (1) Is financed with a section 502 insured loan;
    (2) Was not more than one year old and not previously occupied as a 
residence at the time financial assistance was granted; and
    (3) Is built to the Federal Manufactured Home Construction and 
Safety Standards (FMHCSS) and is certified by an affixed label as shown 
in exhibit F of subpart A of part 1944 of this chapter.
    (c) Non-structural defect. A construction defect which does not 
affect the overall useful life, habitability, or structural integrity of 
the dwelling or unit. Some non-structural defects may be covered under 
the contractor's warranty. Examples of non-structural defects include, 
but are not limited to:
    (1) Cracks attributed to normal curing or settlement.
    (2) Cosmetic defects in cabinets, woodwork, floorcovering, 
wallcovering, ornamental trim, etc.
    (3) Improper or incomplete seeding or sodding of yard, or failure of 
trees, shrubs, grass and other landscaping items to thrive.
    (4) Improper grading of yard, unless the grade is causing damage 
which may lead to a structural defect.
    (d) Structural defect. A defect in the dwelling or unit, 
installation or set-up of a unit, or a related facility or a deficiency 
in the site or site development which directly and significantly reduces 
the useful life, habitability, or integrity of the dwelling or unit. The 
defect may be due to faulty material, poor workmanship, or latent causes 
that existed when the dwelling or unit was constructed. The term 
includes, but is not limited to:
    (1) Structural failures which directly and significantly affect the 
basic integrity of the dwelling or unit such as in the foundation, 
footings, basement walls, slabs, floors, framing, walls, ceiling, or 
roof.
    (2) Major deficiencies in the utility components of the dwelling or 
unit or site such as faulty wiring, or failure of sewage disposal or 
water supply systems located on the property securing the loan caused by 
faulty materials or improper installation.

[[Page 179]]

    (3) Serious defects in or improper installation of heating systems 
or central air conditioning.
    (4) Defects in or improper installation of safety and security 
devices, such as windows, external doors, locks, smoke detectors, 
railings, etc., as well as failure to provide or properly install 
devices to aid occupancy of dwellings by handicapped individuals, where 
required.
    (5) Defects in or improper installation of protective materials, 
such as insulation, siding, roofing material, exterior paint, etc.

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1924.253 
was amended in paragraph (a)(3) by revising the words ``subpart A of 
part 1944 of this chapter'' to read ``7 CFR part 3550'' and in paragraph 
(b)(3) by revising the words ``exhibit F of subpart A of part 1944 of 
this chapter'' to read ``exhibit J of subpart A of part 1924 of this 
chapter'' effective January 23, 2003.



Secs. 1924.254-1924.257  [Reserved]



Sec. 1924.258  Notification of borrowers.

    FmHA or its successor agency under Public Law 103-354 will notify by 
letter all borrowers who receive Section 502 RH financial assistance for 
a newly constructed dwelling or unit of the provisions of this subpart. 
Subsequent owners of eligible dwellings will also be notified in 
accordance with this section. Borrowers will be notified within 30 days 
after the loan is closed, or within 30 days after final inspection, 
whichever is later. This notification will contain information 
concerning time frames for filing claims under this subpart. FmHA or its 
successor agency under Public Law 103-354 will also notify and advise 
borrowers of the construction defects procedure at any time construction 
defects are apparent within the statutory time frame and favorable 
results cannot be obtained from the contractor. This notification will 
be documented in the borrower's case file.



Sec. 1924.259  Handling dwelling construction complaints.

    This section describes the procedure for handling construction 
defect complaints.
    (a) Each borrower who complains about construction defects will be 
requested to make a written complaint using a format specified by FmHA 
or its successor agency under Public Law 103-354 (available in any FmHA 
or its successor agency under Public Law 103-354 office). All known 
defects will be listed. An oral complaint may be accepted if making a 
written complaint will impose a hardship on the borrower. If an oral 
complaint is made, FmHA or its successor agency under Public Law 103-354 
will notify the contractor on behalf of the borrower.
    (b) The borrower will be informed that if, after 30 calendar days, 
the defects have not been corrected or other satisfactory arrangements 
made by the contractor, the borrower should notify FmHA or its successor 
agency under Public Law 103-354 using a format specified by FmHA or its 
successor agency under Public Law 103-354 (available in any FmHA or its 
successor agency under Public Law 103-354 office).
    (c) FmHA or its successor agency under Public Law 103-354 will 
advise the contractor in writing of the borrower's complaint, the time 
and date of planned inspection by FmHA or its successor agency under 
Public Law 103-354 personnel, and request that the contractor accompany 
the inspector and borrower on a joint inspection of the property in an 
attempt to resolve the complaint.
    (d) If, prior to the planned inspection, the contractor informs FmHA 
or its successor agency under Public Law 103-354 that the alleged 
defect(s) has been or will be corrected within 30 calendar days, FmHA or 
its successor agency under Public Law 103-354 will notify the borrower.
    (e) If the case is not resolved as outlined in paragraph (d) of this 
section, FmHA or its successor agency under Public Law 103-354 will:
    (1) [Reserved]
    (2) Notify the borrower, contractor and manufacturer, if applicable, 
in writing of FmHA or its successor agency under Public Law 103-354's 
findings and who has been determined responsible for correcting the 
defect(s).
    (i) If the defects are determined to be covered under the 
contractor's warranty, FmHA or its successor agency under Public Law 
103-354 will advise the contractor that the repairs must be

[[Page 180]]

completed within 30 calendar days or other time period agreed to by the 
borrower, the contractor, and FmHA or its successor agency under Public 
Law 103-354.
    (ii) FmHA or its successor agency under Public Law 103-354 will 
further advise the contractor and/or manufacturer that if the defect(s) 
are not corrected, the Government will consider compensating the 
borrower for the costs of correcting the defect(s). In such a case, the 
contractor and/or manufacturer may be liable for costs paid by the 
Government and may be subject to suspension and/or debarment pursuant to 
subpart M of part 1940 of this chapter (available in any FmHA or its 
successor agency under Public Law 103-354 office). Even if the 
manufacturer is determined to be solely responsible for the defect, the 
contractor will still be held liable for correction of the defect.
    (3) Should a contractor refuse to correct a defect after being 
officially requested in writing to do so, FmHA or its successor agency 
under Public Law 103-354 will promptly institute formal suspension and 
debarment proceedings against the contractor (as a company and as 
individual(s)) in accordance with subpart M of part 1940 of this chapter 
(available in any FmHA or its successor agency under Public Law 103-354 
office). The contractor's failure to reply to official correspondence or 
inability to correct a defect constitutes noncompliance.
    (4) If the contractor is willing to correct legitimate defects but 
the borrower refuses to permit this, FmHA or its successor agency under 
Public Law 103-354 will document the facts in the borrower's case file. 
If the borrower chooses to file a claim for compensation for these 
defects, the circumstances of the borrower's refusal will be reviewed 
and may be sufficient grounds for disapproval of the claim.
    (f)-(h) [Reserved]



Sec. 1924.260  Handling manufactured housing (unit) construction complaints.

    When a borrower who has purchased a manufactured home (or ``unit'') 
complains about construction defects, the borrower will be instructed to 
first contact the dealer-contractor from whom the unit was purchased. 
FmHA or its successor agency under Public Law 103-354 will assist the 
borrower in obtaining assistance through the dealer-contractor's and/or 
HUD's complaint resolution process. If the dealer-contractor cannot 
resolve the complaint, the borrower should contact the appropriate State 
Administrative Agency (SAA) or HUD. If the complaint resolution process 
does not result in the correction of the defect, the borrower's 
complaint will be handled in accordance with Sec. 1924.259 of this 
subpart.



Sec. 1924.261  Handling complaints involving dwellings covered by an independent or insured home warranty plan.

    Borrowers with complaints about dwellings covered by an independent 
or insured home warranty plan will be instructed to first contact the 
warranty company and follow the complaint resolution process for that 
company, with the assistance of FmHA or its successor agency under 
Public Law 103-354, if needed. If the complaint is not resolved in this 
manner, it will be handled under Sec. 1924.259 of this subpart.



Sec. 1924.262  Handling complaints involving dwellings constructed by the self-help method.

    When a borrower whose dwelling was constructed by the self-help 
method complains about construction defects, FmHA or its successor 
agency under Public Law 103-354 will determine whether the defect is the 
result of work performed by a contractor or work performed by the 
borrower under the guidance of the self-help group. Defects which are 
determined to be the responsibility of a contractor will be handled in 
accordance with Sec. 1924.259 of this subpart. Defects determined to be 
the result of work performed by the borrower are not eligible for 
compensation under this subpart.



Secs. 1924.263-1924.264  [Reserved]



Sec. 1924.265  Eligibility for compensation for construction defects.

    (a) To be eligible for assistance under this subpart, the following 
criteria must be met:
    (1) The approval official, in consultation with the State Architect/
Engineer

[[Page 181]]

and/or Construction Inspector, must determine that:
    (i) The construction is defective in workmanship, material or 
equipment, or
    (ii) The dwelling or unit has not been built in substantial 
compliance with the approved drawings and specifications, or
    (iii) The dwelling or unit does not comply with the FmHA or its 
successor agency under Public Law 103-354 construction standards in 
effect at the time the loan was approved or the conditional commitment 
was issued, or
    (iv) The property does not meet code requirements.
    (2) The claim must be for one or more of the following:
    (i) To pay for repairs;
    (ii) To compensate the owner for repairs;
    (iii) To pay emergency living or other expenses resulting from the 
defect; or
    (iv) To acquire title to property.
    (3) The dwelling or unit must be newly constructed as defined in 
Sec. 1924.253 of this subpart and financed with an insured Section 502 
RH loan.
    (4) The claim seeking compensation from FmHA or its successor agency 
under Public Law 103-354 must be filed with FmHA or its successor agency 
under Public Law 103-354 within 18 months after the date financial 
assistance is granted. Defects for which claims are filed beyond the 18-
month period must have been documented by FmHA or its successor agency 
under Public Law 103-354 in the borrower's case file or on the form 
designated by FmHA or its successor agency under Public Law 103-354 
(available in any FmHA or its successor agency under Public Law 103-354 
office), prior to expiration of the 18-month period. For loans made to 
construct a new dwelling or erect a new manufactured housing unit, 
financial assistance is granted on the date of final construction 
inspection and acceptance by the borrower and FmHA or its successor 
agency under Public Law 103-354. Claims must be submitted by completing 
the designated form (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    (5) Any obligation of the contractor to correct the defect(s) under 
a contractor's warranty must have expired, or the contractor is 
responsible for making corrections under the contractor's warranty but 
is unable or unwilling to do so.
    (b) Subsequent owners of eligible dwellings or units who are also 
Section 502 borrowers may be eligible to receive compensation for 
construction defects. These owners will be notified in accordance with 
Sec. 1924.258 of this subpart. However, the claim for compensation must 
be filed in accordance with paragraph (a)(4) of this section within the 
18-month period established for the original rural housing (RH) 
borrower.



Sec. 1924.266  Purposes for which claims may be approved.

    (a) Eligible purposes. A claim may be approved to:
    (1) Pay, or reimburse the borrower for costs already paid, to repair 
major structural defects which are completed in accordance with plans 
and specifications approved by FmHA or its successor agency under Public 
Law 103-354. Repairs must be made by a reputable licensed contractor and 
a warranty covering the repairs will be issued by the contractor when 
the repairs are completed, as prescribed in subpart A of this part. 
Payment will be based on actual cost of the development and the borrower 
must provide evidence to reasonably establish the development cost. 
Workmanship and materials used in repairs must be consistent with the 
level of quality specified in the original dwelling or unit 
specifications and/or comparable to the items being replaced. Payment 
may be made:
    (i) To cover damages which are a direct result of the defect to 
permanent enhancements made, such as landscaping, completion of 
unfinished living spaces, etc., of the dwelling or unit, installation or 
set-up of the unit, or related facilities, and
    (ii) For costs approved by FmHA or its successor agency under Public 
Law 103-354 for professional reports by engineers, architects or others 
needed to determine cause of or means to repair the defect.

[[Page 182]]

    (2) Reimburse the borrower for funds expended for emergency repairs. 
Emergency repairs are those repairs necessary to preserve the integrity 
of the structure, to prevent damage or further damage to personal 
property or fixtures in the dwelling or unit and related facilities, or 
to prevent or eliminate immediate health hazards. Receipts or other 
evidence of borrower's expenditures must be provided.
    (3) Acquire title to the property by the Government and, when 
appropriate, compensate the claimant for any loss of borrower 
contribution at the time the loan was closed. Conveyance of properties 
under this section will be handled in accordance with subpart A of part 
1955 of this chapter.
    (i) Before FmHA or its successor agency under Public Law 103-354 
accepts a conveyance, the borrower must attempt to sell the dwelling or 
unit in accordance with subpart C of part 1965 of this chapter, if the 
dwelling or unit is considered decent, safe and sanitary as prescribed 
in subpart C of part 1955 of this chapter. If the property is sold, FmHA 
or its successor agency under Public Law 103-354 will:
    (A) Pay the borrower's relocation expenses, including temporary 
living expenses as prescribed in paragraph (a)(4) of this section, until 
another suitable property can be located;
    (B) Pay related sales expenses, as prescribed in subpart C of part 
1965 of this chapter, if the property is sold for less than the debt 
against it;
    (C) Release the borrower from personal liability for the remaining 
FmHA or its successor agency under Public Law 103-354 debt; and
    (D) Process an application for a new RH loan if the borrower so 
desires and is still eligible for FmHA or its successor agency under 
Public Law 103-354 assistance.
    (ii) If the dwelling or unit is not considered decent, safe and 
sanitary as prescribed in subpart C of part 1955 of this chapter, FmHA 
or its successor agency under Public Law 103-354 should accept a 
voluntary conveyance of the property under the provisions of subpart A 
of part 1955 of this chapter. Compensation for properties taken into 
inventory under this paragraph may not exceed the difference between the 
present market value of the security as established by the appraisal 
when the loan was made and the amount of the FmHA or its successor 
agency under Public Law 103-354 loan and any prior liens.
    (iii) A borrower contribution which may be compensated for under 
this paragraph may be such things as:
    (A) A borrower's land or cash contribution,
    (B) Development work done by the borrower under the self-help 
program or borrower method of construction, the cost of which was not 
included in the loan funds,
    (C) Attorney fees, abstract costs or title insurance costs actually 
paid by the claimant in connection with closing the loan.
    (4) Pay or reimburse the borrower for temporary living expenses, 
miscellaneous expenses, storage of household goods and moving expenses 
incurred as a result of the defect.
    (i) Payment under this paragraph may be made under either of the 
following circumstances:
    (A) The property is acquired by the Government in accordance with 
subpart A of part 1955 of this chapter and FmHA or its successor agency 
under Public Law 103-354 determines that the dwelling is not habitable 
and the severity of the defect(s) prevents the property from being 
repaired and made suitable as a permanent residence for the borrower.
    (B) The property is not acquired by the Government but FmHA or its 
successor agency under Public Law 103-354 determines that the dwelling 
is not habitable or must be vacated in order to repair the defects.
    (ii) Claims for compensation under paragraph (a)(4) of this section 
are limited as follows:
    (A) Compensation may be granted for temporary living expenses for 
not more than 45 calendar days per claim unless a longer period is 
authorized by FmHA or its successor agency under Public Law 103-354. 
Compensation will be paid for actual cost to the claimant not to exceed 
the Government per diem rate for the area where the borrower's dwelling 
or unit is located. Reimbursement may be claimed for expenses such as 
food, lodging, laundering, etc.,

[[Page 183]]

which would not have been incurred had the claimant remained in the 
house.
    (B) Compensation may be granted for actual miscellaneous expenses 
not to exceed $500 to cover such items as utility connect and disconnect 
fees.
    (C) Compensation may be granted for moving and storage expenses not 
to exceed $5,000 unless authorized by FmHA or its successor agency under 
Public Law 103-354 and not to exceed the actual cost of moving the 
claimant household with personal belongings a distance of not more than 
50 miles from the original residence. Compensation for storage expenses 
may not exceed that amount paid to store household furnishings for 45 
days.
    (D) A strict accounting of the use of such funds must be maintained 
by the borrower and will be verified by FmHA or its successor agency 
under Public Law 103-354.
    (5) Compensate the claimant for reasonable interest paid on loans 
obtained for the sole purpose of correcting structural defects or other 
approved purposes under this section.
    (b) Ineligible purposes. Compensation will not be granted for:
    (1) Completion of a dwelling or unit or installation of materials/
items required under the construction contract and/or specifications.
    (2) Defective items which were not completed under the contract 
method or under the conditional commitment and supported by a builder's 
warranty. Work performed under the borrower method or self-help program 
without a warranty by a responsible party is not eligible for 
compensation.
    (3) Damage caused by defective design, workmanship, or material in 
making enhancements to or remodeling the dwelling or unit or related 
facilities which were not financed or approved by FmHA or its successor 
agency under Public Law 103-354.
    (4) The loss of past, present or future wages or salary directly or 
indirectly resulting from the defect.
    (5) Treatment for physical or psychological damages including 
medical and dental claims.
    (6) Death benefits or funeral expenses.
    (7) Damages encountered as a result of war, civil disorder, flood, 
tornado, lightning, earthquake or acts of nature which the structure was 
not designed to withstand.
    (8) Damages resulting from the homeowner's negligence or failure to 
properly maintain the property.
    (9) Damage to personal property.

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1924.266 
was amended by revising in the introductory text of paragraph (a)(3) the 
words ``subpart A of part 1955 of this chapter'' to read ``7 CFR part 
3550'', in the introductory text of paragraph (a)(3)(i) the words 
``subpart C of part 1965 of this chapter'' to read ``7 CFR part 3550,'' 
and the words ``subpart C of part 1955 of this chapter'' to read ``7 CFR 
part 3550'', in paragraph (a)(3)(i)(B) the words ``subpart C of part 
1965 of this chapter'' to read ``7 CFR part 3550'', in paragraph 
(a)(3)(ii) the words ``subpart C of part 1955 of this chapter'' to read 
``7 CFR part 3550, `` and the words ``subpart A of part 1955 of this 
chapter'' to read ``7 CFR part 3550'', and in paragraph (a)(4)(i)(A) the 
words ``subpart A of part 1955 of this chapter'' to read ``7 CFR part 
3550'' effective January 23, 2003.



Secs. 1924.267-1924.270  [Reserved]



Sec. 1924.271  Processing applications.

    An application for compensation for construction defects shall be 
submitted by the claimant to FmHA or its successor agency under Public 
Law 103-354 on the designated form (available in any FmHA or its 
successor agency under Public Law 103-354 office). The application shall 
be completed in its entirety. All structural defects and claims for 
which compensation is sought will be listed. Borrowers will be told not 
to incur any expenses for repairs or temporary living expenses, except 
for emergency situations, until funds have been allocated and the 
request has been approved under Sec. 1924.273 of this subpart.



Sec. 1924.272  [Reserved]



Sec. 1924.273  Approval or disapproval.

    (a) Claimants will be notified in writing of the decision on the 
claim within 60 days of the date the designated form (available in any 
FmHA or its successor agency under Public Law 103-354 office) is signed 
by the borrower. If the claim or any part of the claim is denied

[[Page 184]]

at any level, the claimant will be informed in writing of the reason(s) 
for the denial and advised of appeal rights in accordance with subpart B 
of part 1900 of this chapter.
    (b) [Reserved]

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1924.273 
was amended in paragraph (a) by revising the words ``subpart B of part 
1900 of this chapter'' to read ``7 CFR part 11'' effective January 23, 
2003.



Sec. 1924.274  Final inspection.

    Except for emergency repairs, all repair work must be performed in 
accordance with subpart A of this part. In all cases, FmHA or its 
successor agency under Public Law 103-354 will make a final inspection 
of the repair work performed before final payment is made for the work.



Sec. 1924.275  [Reserved]



Sec. 1924.276  Action against contractor.

    If FmHA or its successor agency under Public Law 103-354 pays for 
correction of construction defects which are the responsibility of the 
contractor, debarment proceedings will be initiated against the 
contractor in accordance with subpart M of part 1940 of this chapter 
(available in any FmHA or its successor agency under Public Law 103-354 
office), even if the contractor has gone out of business, declared 
bankruptcy, cannot be located, etc. The debarment will be pursued in 
both the contractor's company name and the principal parties as 
individuals, and any successor entities, if known. If the manufacturer 
of the defective product is determined to be solely responsible, no 
action will be taken against the contractor. In such a case, debarment 
will be initiated against the manufacturer. An assignment of the 
borrower's claim against the contractor or other party will be obtained 
if it appears to the approval officials, with any necessary advice from 
the Office of the General Counsel, that recovery is reasonably possible.



Secs. 1924.277-1924.299  [Reserved]



Sec. 1924.300  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) and have been assigned OMB control number 0575-0082. Public 
reporting burden for this collection of information is estimated to vary 
from 15 minutes to 2 hours per response, with an average of .28 hours 
per response including time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information. Send comments 
regarding this burden estimate or any other aspect of this collection of 
information, including suggestions for reducing this burden, to 
Department of Agriculture, Clearance Officer, OIRM, room 404-W, 
Washington, DC 20250; and to the Office of Management and Budget, 
Paperwork Reduction Project (OMB 575-0082), Washington, DC 
20503.



PART 1925--TAXES--Table of Contents




                  Subpart A--Real Estate Tax Servicing

Sec.
1925.1  General.
1925.2  Definition of tax.
1925.3  Servicing taxes.
1925.4  Servicing delinquent taxes.
1925.5-1925.50  [Reserved]

    Authority: 7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; 7 CFR 2.23; 
7 CFR 2.70.

    Source: 57 FR 36590, Aug. 14, 1992, unless otherwise noted.



                  Subpart A--Real Estate Tax Servicing



Sec. 1925.1  General.

    This Instruction applies to borrowers with a Farm Ownership (FO), 
Operating Loan (OL), Soil and Water (SW), Recreation Loan (RL), 
Emergency (EM), Economic Opportunity (EO), Rural Rental Housing (RRH), 
Rural Cooperative Housing (RCH), Labor Housing (LH), Softwood Timber 
(ST), and Non-Program (NP) loans secured by real estate. It also applies 
to section 502 and section 504 Rural Housing borrowers (Single Family 
Housing (SFH)) who also have a Farmer Program loan. It does not apply to 
borrowers who have a SFH loan only; those will be serviced under 
Sec. 1965.105 of subpart C of part 1965 of this chapter. Borrowers are

[[Page 185]]

responsible for paying taxes on the real estate security to the proper 
taxing authorities before taxes become delinquent. This obligation is 
set forth in the security instrument securing the loan.

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1925.1 was 
amended by revising the words ``Sec. 1965.105 of subpart C of part 1965 
of this chapter'' to read ``7 CFR part 3550'' effective January 23, 
2003.



Sec. 1925.2  Definition of tax.

    For the purpose of this instruction, the word ``tax'' means all 
taxes, assessments, levies, irrigation and water charges or other 
similar obligations which are or will, on nonpayment, become a lien upon 
the real estate prior to the mortgage securing the Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
loan.



Sec. 1925.3  Servicing taxes.

    (a) The County Supervisor will be responsible for ascertaining that 
all mortgaged real estate is listed properly for tax purposes.
    (b) The County Supervisor will be responsible for taking all actions 
in connection with taxes as may be necessary to protect the Government's 
security interests. Any unusual situations that may arise with respect 
to tax servicing should be referred to the State Office for 
consideration.
    (c) The County Supervisor will encourage each borrower to pay taxes 
promptly in order to avoid any penalties. Normally, this can be 
accomplished through routine servicing of loans by emphasizing the 
advantages of setting aside sufficient income to meet tax obligations 
when they become due. Taxes will be adequately budgeted for those 
borrowers with whom Form FmHA or its successor agency under Public Law 
103-354 431-2, ``Farm and Home Plan,'' is developed. Each borrower will 
be encouraged to notify the County Supervisor when he has paid his 
taxes. After the delinquent date, it will be necessary for the County 
Supervisor to determine the borrowers whose taxes are delinquent. Forms 
FmHA or its successor agency under Public Law 103-354 1905-1, 
``Management System Card-Individual,'' FmHA or its successor agency 
under Public Law 103-354 1905-5, ``Management System Card- Individual 
(Rural Housing Only),'' and FmHA or its successor agency under Public 
Law 103-354 1905-10, ``Management System Card-Association,'' will be 
used in posting servicing action on delinquent taxes.



Sec. 1925.4  Servicing delinquent taxes.

    (a) The County Supervisor will contact each borrower with a 
delinquent tax and make every practical effort to have him pay the tax 
with his own funds. He will use the Management System Card for follow-up 
of delinquent taxes. If the delinquent tax is not paid and the borrower 
comes to the office with proceeds for application on the FmHA or its 
successor agency under Public Law 103-354 account secured by the real 
estate, the County Office personnel will endeavor to get the borrower to 
use the proceeds to pay the delinquent tax. If the amount of the 
delinquent tax is less than the amount of the proposed payment, the 
difference will be applied on the FmHA or its successor agency under 
Public Law 103-354 account in accordance with the policy outlined in 
FmHA or its successor agency under Public Law 103-354 Instructions 1951-
A and 1951-G.
    (b) Prior (usually about 90 days) to the time it is legally possible 
for action to be taken that will cause the borrower to lose title or 
right of possessions of the security property or the use of essential 
water, the County Supervisor will contact the borrower and definitely 
determine if he will pay the delinquent tax immediately. If the borrower 
is unable or unwilling to pay the delinquent tax with his own funds 
after every appropriate effort has been made to have him do so, the 
County Supervisor will refer to FmHA or its successor agency under 
Public Law 103-354 Instruction 2024-A and utilize the Type 60 Purchase 
Order System to pay the amount of the delinquent taxes plus the amount 
of any accrued penalty to bring taxes current.
    (1) In an exceptional case where reasons for delinquent taxes have 
been removed and planned income during the next year covers payment of 
current obligations plus delinquent taxes not vouchered, only the 
delinquent taxes

[[Page 186]]

will be paid that could cause the borrower to lose title or right of 
possession of security property.
    (2) If the Government is holding a mortgage other than a first 
mortgage on the property, do not initiate payment request until the 
County Supervisor has determined that (i) the prior lien holder will not 
pay the delinquent tax, (ii) the Government's security will be 
jeopardized if the delinquent tax is not paid, and (iii) the value of 
the security is sufficient to justify the advance.

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1925.4 was 
amended in paragraph (a) by revising the words ``FmHA or its successor 
Agency under Public Law 103-354 Instructions 1951-A and 1951-G'' to read 
``subpart A of part 1951 of this chapter'' effective January 23, 2003.



Secs. 1925.5-1925.50  [Reserved]



PART 1927--TITLE CLEARANCE AND LOAN CLOSING--Table of Contents




Subpart A [Reserved]

         Subpart B--Real Estate Title Clearance and Loan Closing

Sec.
1927.51  General.
1927.52  Definitions.
1927.53  Costs of title clearance and closing of transactions.
1927.54  Requirements for closing agents.
1927.55  Title clearance services.
1927.56  Scheduling loan closing.
1927.57  Preparation of closing documents.
1927.58  Closing the transaction.
1927.59  Subsequent loans and transfers with assumptions.
1927.60-1927.99  [Reserved]
1927.100  OMB control number.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

    Source: 61 FR 11711, Mar. 22, 1996, unless otherwise noted.

Subpart A [Reserved]



         Subpart B--Real Estate Title Clearance and Loan Closing



1927.51  General.

    (a) Types of loans covered by this subpart. This subpart sets forth 
the authorities, policies, and procedures for real estate title 
clearance and closing of loans, assumptions, voluntary conveyances and 
credit sales in connection with the following types of Rural Housing 
Service (RHS) and Farm Service Agency (FSA) loans: Farm Ownership (FO), 
Nonfarm Enterprise (FO-NFE), Emergency (EM), Operating (OL), Rural 
Housing (RH), Farm Labor Housing (LH), Rural Rental Housing (RRH), Rural 
Cooperative Housing (RCH), Soil and Water (SW), Indian Land acquisition 
loans involving nontrust property, and NonProgram (NP) loans. This 
subpart does not apply to guaranteed loans.
    (b) Programs not covered by this subpart. Title clearance and 
closing for all other types of agency loans and assumptions will be 
handled as provided in the applicable program instructions or as 
provided in special authorizations from the National Office.
    (c) [Reserved]
    (d) Copies of all agency forms referenced in this regulation and the 
agency's internal administrative procedures for title clearance and loan 
closing are available upon request from the agency's State Office. Forms 
and title clearance and loan closing requirements which are specific for 
any individual state must be obtained from the agency State Office for 
that state.



1927.52  Definitions.

    Agency. The Rural Housing Service (RHS) and Farm Service Agency 
(FSA) or their successor agencies.
    Approval official. The agency employee who has been delegated the 
authority to approve, close, and service the particular kind of loan, 
will approve an attorney or title company as closing agent for the 
loans. If a loan must be approved at a higher level, the initiating 
office may approve the closing agent.
    Approved attorney. A duly licensed attorney, approved by the agency, 
who provides title opinions directly to the agency and the borrower or 
upon whose certification of title an approved title insurance company 
issues a policy of title insurance. Approved attorneys also close loans, 
assumptions, credit sales, and voluntary conveyances and disburse funds 
in connection with agency loans. Approved attorney is further defined in 
Sec. 1927.54(c).

[[Page 187]]

    Approved title insurance company. A title insurance company, 
approved by the agency, (including its local representatives, employees, 
agents, and attorneys) that issues a policy of title insurance. 
Depending on the local practice, an approved title insurance company may 
also close loans, assumptions, credit sales, and voluntary conveyances 
and disburse funds in connection with agency loans. If the approved 
title insurance company does not close the loan itself, the loan closing 
functions may be performed by approved attorneys or closing agents 
authorized by the approved title insurance company.
    Borrower. The party indebted to the agency after the loan, 
assumption, or credit sale is closed.
    Certificate of title. A certified statement as to land ownership, 
based upon examination of record title.
    Closed loan. A loan is considered to be closed when the mortgage is 
filed for record and the appropriate lien has been obtained.
    Closing agent. The approved attorney or title company selected by 
the applicant and approved by the agency to provide closing services for 
the proposed loan. Unless a title insurance company also provides loan 
closing services, the term ``title company'' does not include ``title 
insurance company.''
    Closing protection letter. An agreement issued by an approved title 
insurance company which is an American Land Title Association (ALTA) 
form closing protection letter or which is otherwise acceptable to the 
agency and which protects the agency against damage, loss, fraud, theft, 
or injury as a result of negligence by the issuing agent, approved 
attorney, or title company when title clearance is done by means of a 
policy of title insurance. Depending on the area, closing protection 
letters may also be known as ``Insured Closing Letters,'' 
``Indemnification Agreements,'' ``Insured Closing Service Agreements,'' 
or ``Statements of Settlement Service Responsibilities.''
    Cosigner. A party who joins in the execution of a promissory note or 
assumption agreement to guarantee repayment of the debt.
    Credit sale. A sale in which the agency provides credit to the 
purchasers of agency inventory property. Title clearance and closing of 
a credit sale are the same as for an initial loan except the property is 
conveyed by quitclaim deed.
    Deed of trust. See trust deed.
    Exceptions. Exceptions include, but are not limited to, recorded 
covenants; conditions; restrictions; reservations; liens; encumbrances; 
easements; taxes and assessments; rights-of-way; leases; mineral, oil, 
gas, and geothermal rights (with or without the right of surface entry); 
timber and water rights; judgments; pending court proceedings in Federal 
and State courts (including bankruptcy); probate proceedings; and 
agreements which limit or affect the title to the property.
    Fee simple. An estate in land of which the owner has unqualified 
ownership and power of disposition.
    FSA. The Farm Service Agency, an agency of the United States 
Department of Agriculture ( and any successor agency). FSA is the 
successor agency for farm program loans of the former Farmers Home 
Administration.
    General warranty deed. A deed containing express covenants by the 
grantor or seller as to good title and right to possession.
    Indemnification agreement. An agreement that protects the agency 
against damage, loss, fraud, theft, or injury as a result of useful 
conduct or negligence on behalf of the issuing agent, approved attorney, 
or title company. This agreement may also be entitled closing protection 
letter, insured closing letter, insured closing service agreement, 
statement of settlement service responsibilities, or letters which 
provide similar protection.
    Issuing agent. An individual or entity who is authorized to issue 
title insurance for an approved title insurance company.
    Land purchase contract (contract for deed). An agreement between the 
buyer and seller of land in which the buyer has the right to possession 
and use of the land over a period of time (usually in excess of 1 year) 
and makes periodic payments of a portion of the purchase price to the 
seller. The seller retains legal title to the property until the

[[Page 188]]

final payment is made, at which time the buyer will receive a deed to 
the land vesting fee title in the buyer.
    Mortgage. Real estate security instrument which pledges land as 
security for the performance of an obligation such as repayment of a 
loan. For the purpose of this regulation the term ``mortgage'' includes 
deed of trust and deed to secure debt. A real estate mortgage or deed of 
trust form for the state in which the land to be taken as security is 
available in any agency office, and will be used to secure a mortgage to 
the agency.
    National Office. The National Headquarters Office of FSA or RHS 
depending on the loan program involved.
    OGC. The Office of the General Counsel, United States Department of 
Agriculture.
    Program regulations. The agency regulations for the particular loan 
program involved (e.g., subpart A of part 1944 of this chapter for 
single family housing (SFH) loans).
    Quitclaim deed. A transfer of the seller's interest in the title, 
without warranties or covenants. This type of deed is used by the agency 
to convey title to purchasers of inventory property.
    RHS. The Rural Housing Service, an agency of the United States 
Department of Agriculture, or its successor agency. RHS is the successor 
agency to the Rural Housing and Community Development Service (RHCDS) 
which was, in turn, the successor agency to the Farmers Home 
Administration.
    Seller. Individual or other entity which convey ownership in real 
property to an applicant for an agency loan or to the agency itself.
    Special warranty deed. A deed containing a covenant whereby the 
grantor agrees to protect the grantee against any claims arising during 
the grantor's period of ownership.
    State Office. For FSA this term refers to the FSA State Office. For 
RHS this term refers to the Rural Economic and Community Development 
State Director.
    Title clearance. Examination of a title and its exceptions to assure 
the agency that the loan is legally secured and has the required 
priority.
    Title company. A company that may abstract title, act as an issuing 
agent of title insurance for a title insurance company, act as a loan 
closing agent, and perform other duties associated with real estate 
title clearance and loan closing.
    Title defects. Any exception or legal claim of ownership (through 
deed, lien, judgment, or other recorded document), on behalf of a third 
party, which would prevent the seller from conveying a marketable title 
to the entire property.
    Trust deed. A three party security instrument conveying title to 
land as security for the performance of an obligation, such as the 
repayment of a loan. For the purpose of this regulation a trust deed is 
covered by the term ``mortgage.'' A trust deed is the same as a deed of 
trust.
    Voluntary conveyance. A method of liquidation by which title to 
agency security is transferred by a borrower to the agency by deed in 
lieu of foreclosure.
    Warranty deed. A deed in which the grantor warrants that he or she 
has the right to convey the property, the title is free from 
encumbrances, and the grantor shall take further action necessary to 
perfect or defend the title.

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1927.52 was 
amended by revising the definitions for ``Program regulations'' and 
``State Office'' effective January 23, 2003. For the convenience of the 
user the revised text is set forth as follows:

Sec. 1927.52  Definitions.

                                * * * * *

    Program regulations. The agency regulations for the particular loan 
program involved (e.g., 7 CFR part 3550 for single family housing (SFH) 
loans).

                                * * * * *

    State Office. For FSA, this term refers to the FSA State Office. For 
RHS, this term refers to the Rural Development State Director.

                                * * * * *



Sec. 1927.53  Costs of title clearance and closing of transactions.

    The borrower or the seller, or both, in compliance with the terms of 
the

[[Page 189]]

sales contract or option will be responsible for payment of all costs of 
title clearance and closing of the transaction and will arrange for 
payment before the transaction is closed. These costs will include any 
costs of abstracts of title, land surveys, attorney's fees, owner's and 
lender's policies of title insurance, obtaining curative material, 
notary fees, documentary stamps, recording costs, tax monitoring 
service, and other expenses necessary to complete the transaction.



Sec. 1927.54  Requirements for closing agents.

    (a) Form of title certification. State Offices are directed to 
require title insurance for all loan closings unless the agency 
determines that the use of title insurance is not available or is 
economically not feasible for the type of loan involved or the area of 
the state where the loan will be closed. If title insurance is used, 
State Offices are authorized to require a closing protection letter 
issued by an approved title insurance company to cover the closing 
agent, if available. A closing protection letter need not be furnished 
when the closing is conducted by the title insurance company.
    (b) Approval of closing agent. An attorney or title company may act 
as a closing agent and close agency real estate loans, provide necessary 
title clearance, and perform such other duties as required in this 
subpart. A closing agent will be responsible for closing agency loans 
and disbursing both agency loan funds and funds provided by the borrower 
in connection with the agency loan so as to obtain title and security 
position as required by the agency. The closing agent must be covered by 
a fidelity bond which will protect the agency unless a closing 
protection letter is provided to the agency. The borrower will select 
the approved closing agent. If title clearance is by an attorney's 
opinion, the agency will approve the attorney who will perform the 
closing in accordance with paragraph (c) of this section. The attorney 
will be approved after submitting a certification acceptable to the 
agency. If title certification is by means of a policy of title 
insurance, the title company which will issue the policy must have been 
approved in accordance with paragraph (d) of this section. A closing 
agent's delay in providing services without justification in connection 
with agency loans may be a basis for not approving the closing agent in 
future cases.
    (c) Approval of attorneys. Any attorney selected by an applicant, 
who will be providing title clearance where the certificate of title 
will be an attorney's opinion, must submit an agency form certifying to 
professional liability insurance coverage. If the attorney is also the 
closing agent, fidelity coverage for the attorney and any employee 
having access to the funds must be provided. The agency will determine 
the appropriate level of such insurance. Required insurance will, as a 
minimum, cover the amount of the loan to be closed. The agency will 
approve the form stipulating the bond coverage. The agency will approve 
any attorney who is duly licensed to practice law in the state where the 
real estate security is located and who complies with the bonding and 
insurance requirements in this section. If the certification of title 
will be by means of title insurance, any attorney or closing agent 
designated as an approved attorney or closing agent by the approved 
title insurance company which will issue the policy of title insurance 
will be acceptable, and when covered by a closing protection letter, 
will not be required to obtain professional liability insurance or a 
fidelity bond. Each approved title insurance company may provide a 
master list of their approved attorneys that are covered by its closing 
protection letters to the State Office and, in such cases the attorneys 
are approved for closings for that title insurance company. Delay in 
providing closing services without justification may be a basis for not 
approving the attorney in future cases.
    (d) Approval of title companies. A title company acting as a closing 
agent, or as an issuing agent for a title insurance company, must be 
covered by a title insurance company closing protection letter or submit 
an agency form certifying to fidelity coverage to cover all employees 
having access to

[[Page 190]]

the loan funds. The agency will determine the appropriate level of such 
coverage and will approve the form stipulating the bond coverage. Delay 
in providing closing services without justification may be a basis for 
not approving the company in future cases. Each approved title insurance 
company may provide a master list of their approved title companies that 
are covered by its closing protection letter to the State Office and, in 
such cases the title companies on the list are approved for closings for 
that title insurance company.
    (e) Approval of title insurance companies. The agency will approve 
any title insurance company which issues policies of title insurance in 
the State where the security property is located if:
    (1) The form of the owner's and lender's policies of title insurance 
(including required endorsements) to be used in closing agency loans are 
acceptable to the agency, and will contain only standard types of 
exceptions and exclusions approved in advance by the agency;
    (2) The title insurance company is licensed to do business in the 
state (if a license is required); and
    (3) The title insurance company is regulated by a State Insurance 
Commission, or similar regulator, or if not, the title insurance company 
submits copies of audited financial statements, or other approved 
financial statements satisfactory to the agency, which show that the 
company has the financial ability to cover losses arising out of its 
activities as a title insurance company and under any closing protection 
letters issued by the title insurance company.
    (4) Delay in providing services without justification may be a basis 
for not approving the company.
    (f) [Reserved]
    (g) Conflict of interest. A closing agent who has, or whose spouse, 
children, or business associates have, a financial interest in the real 
estate which will secure the agency debt shall not be involved in the 
title clearance or loan closing process. Financial interest includes 
having either an equity, creditor, or debtor interest in any 
corporation, trust, or partnership with a financial interest in the real 
estate which will secure the agency debt.
    (h) Debarment or suspension. No attorney, title company, title 
insurance company, or closing agent, currently debarred or suspended 
from participating in Federal programs, may participate in any aspect of 
the agency loan closing and title clearance process.
    (i) Special provisions. Closing agents are responsible for having 
current knowledge of the requirements of State law in connection with 
loan closing and title clearance and should advise the agency of any 
changes in State law which necessitate changes in the agency's State 
mortgage forms and State Supplements.
    (j) [Reserved]



Sec. 1927.55  Title clearance services.

    (a) Responsibilities of closing agents. Services to be provided to 
the agency and the borrower by a closing agent in connection with the 
transaction vary depending on whether a title insurance policy or title 
opinion is being furnished. The closing agent is expected to perform 
these services without unnecessary delay.
    (b) [Reserved]
    (c) Ordering title services. Application for title examination or 
insurance will be made by the borrower to a title company or attorney. 
The lender's policy will be for at least the amount of the loan. The 
United States of America will be named as the insured lender.
    (d) Use of title opinion. If a title opinion will be issued, a title 
examination will include searches of all relevant land title and other 
records, so as to express an opinion as to the title of the property and 
the steps necessary to obtain the appropriate title and security 
position to issue a title opinion as required by this subpart. The 
closing agent or approved attorney will determine:
    (1) The legal description and all owners of the real property;
    (2) Whether there are any exceptions affecting the property and 
advise the approval official and borrower of the nature and effect of 
outstanding interests or exceptions, prior sales of part of the 
property, judgments, or interests

[[Page 191]]

to assist in determining which exceptions must be corrected in order for 
the borrowers to obtain good and marketable title of record in 
accordance with prevailing title examination standards, and for the 
agency to obtain a valid lien of the required priority;
    (3) Whether there are outstanding Federal, State, or local tax 
claims (including taxes which under State law may become a lien superior 
to a previously attaching mortgage lien) or homeowner's association 
assessment liens;
    (4) Whether outstanding judgments of record, bankruptcy, insolvency, 
divorce, or probate proceedings involving any part of the property, 
whether already owned by the borrower, or to be acquired by assumption 
or with loan funds, or involving the borrower or the seller exist;
    (5) If a water right is to be included in the security for the loan, 
and if so, the full legal description of the water right;
    (6) In addition to paragraph(d)(2) of this section, if wetlands 
easements or other conservation easements have been placed on the 
property;
    (7) What measures are required for preparing, obtaining, or 
approving curative material, conveyances, and security instruments, and
    (8) That sufficient copies of these interests and exceptions are 
provided as requested by the approval official.
    (e) Use of title insurance. When title insurance is to be obtained, 
the approval official will be furnished with a title insurance binder 
disclosing any defects in, exceptions to, and encumbrances against, the 
title, the conditions to be met to make the title insurable and in the 
condition required by the agency, and the curative or other actions to 
be taken before closing of the transaction. The binder must include a 
commitment to issue a lender policy in an amount at least equal the 
amount of the loan, except in instances where there may be an 
outstanding owner's policy in favor of the borrower. Not withstanding 
the provisions of this section, the instance of an assumption without a 
subsequent loan, the existing policy may be continued if the coverage 
meets or exceeds the assumption balance and the title company agrees in 
writing to extend coverage in full force and effect.
    (f) [Reserved]



Sec. 1927.56  Scheduling loan closing.

    The agency, in coordination with the closing agent, will arrange a 
loan closing and send loan closing instructions, on an agency form to 
the closing agent when the agency determines that the exceptions shown 
on the preliminary title opinion or title insurance binder will not 
adversely affect the suitability, security value, or successful 
operation of the property and all other agency conditions to closing 
have been satisfied.



Sec. 1927.57  Preparation of closing documents.

    (a) Preparation of deeds. The closing agent, unless prohibited by 
law, will prepare, complete, or approve documents, including deeds, 
necessary for title clearance and closing of the transaction and provide 
the agency with the policy of title insurance or title opinion providing 
the lien priority required by the agency and subject only to exceptions 
approved by the agency. Agency forms will be used when required by this 
part.
    (1)-(2) [Reserved]
    (b) Preparation of mortgages. The closing agent will insure that all 
mortgages are properly prepared, completed, executed, and filed for 
record. Where applicable, the mortgages should recite that it is a 
purchase money mortgage. The following requirements will be observed in 
preparing agency morgages:
    (1)-(8) [Reserved]
    (9) Alteration of mortgage form. An agency mortgage form may be 
altered pursuant to a State Supplement having prior approval of the 
National Office, or in a special case, to comply with the terms of loan 
approval prescribed in accordance with program instructions. No other 
alterations in the printed mortgage forms will be made without prior 
approval of the National Office. Any changes made by deletion, 
substitution, or addition (excluding filling in blanks) will be 
initialed in the margin by all persons signing the mortgage.
    (10) [Reserved]

[[Page 192]]

    (11) Mortgages on leasehold estates. When the agency security 
interest is a leasehold estate, unless State law or State Supplement 
otherwise provides, the real estate mortgage or deed of trust form, 
available in any agency office, will be modified as follows:
    (i) In the space provided on the mortgage for the description of the 
real property security, the leasehold estate and the land covered by the 
lease must be described. The following language must be used unless 
modified by a State Supplement:

    All of borrower's right, title, and interest in and to a leasehold 
estate for an original term of ---- years, commencing on ------, 19 ----
, created and established by and between ------ as lessor and owner and 
---- as lessee, including any extensions and renewals thereof, a copy of 
which lease was recorded or filed in book ----, page ----, as instrument 
number ----, in the Office of the (e.g., County Clerk), for the 
aforesaid county and State and covering the following real property: --
----.

    (ii) Immediately preceding the covenant starting with the words 
``should default,'' the following covenant will be added:

    (  ) Borrower covenants and agrees to pay when due all rents and any 
and all other charges required by said lease, to comply with all other 
requirements of said lease, and not to surrender or relinquish, without 
the Government's prior written consent, any of borrower's right, title, 
or interest in or to said leasehold estate or under said lease while 
this mortgage remains of record.

    (12) Mortgages on land purchase contract. When the agency security 
interest is on a borrower's interest in a land purchase contract, OGC 
will provide language used to modify agency forms.
    (13) [Reserved]
    (c) [Reserved]
    (d) Preparation of protective instruments. The closing agent will 
properly prepare, complete, and approve releases and curative documents 
necessary for title clearance and closing, in recordable form and record 
them if required.
    (1) Prior lienholder's agreement. If any liens (other than agency 
liens or tax liens to local governmental authorities) or security 
agreements (hereafter called ``liens''), with priority over the agency 
mortgage will remain against the real property securing the loan, the 
lienholders must execute, in recordable form, agreements containing all 
of the following provisions unless prior approval for different 
provisions has been obtained from the National Office:
    (i) The prior lienholder shall agree not to declare the lien in 
default or accelerate the indebtedness secured by the prior lien for a 
specific period of time after notice to the agency. The agreement must:
    (A) Provide that the specified period of time will not commence 
until the lienholder gives written notice of the borrower's default and 
the prior lienholder's intention to accelerate the indebtedness to the 
agency office servicing the loan,
    (B) Include the address of the agency servicing office,
    (C) Give the agency the option to cure any monetary default by 
paying the amount of the borrower's delinquent payments to the prior 
lienholder, or pay the obligation in full and have the lien assigned to 
the agency, and
    (D) Provide that the prior lienholder will not declare the lien in 
default for any nonmonetary reason if the agency commences liquidation 
proceedings against the property and thereafter acquires the property.
    (ii) When the prior lien secures future advances, including the 
lienholder's costs for borrower liquidation or bankruptcy, which under 
State law have priority over the mortgage being taken (or an agency 
mortgage already held), the prior lienholder shall agree not to make 
advances for purposes other than taxes, insurance or payments on other 
prior liens without written consent of the agency.
    (iii) The prior lienholder shall consent to the agency making (or 
transferring) the loan and taking (or retaining) the related mortgage if 
the prior lien instrument prohibits a loan or mortgage (or transfer) 
without the prior lienholder's consent.
    (iv) The prior lienholder shall consent to the agency transferring 
the property subject to the prior lien after the agency has obtained 
title to the property either by foreclosure or voluntary conveyance if 
the prior lien instrument prohibits such transfer without the prior 
lienholder's consent.
    (2)-(3) [Reserved]

[[Page 193]]

    (4) Agreement by holder of seller's interest under land purchase 
contract. If the buyer's interest in the security property is that of a 
buyer under a land purchase contract, it will be necessary for the 
seller to execute, in recordable form, an agreement containing all of 
the following provisions:
    (i) The seller shall agree not to sell or voluntarily transfer the 
seller's interest under the land purchase contract without the prior 
written consent of the State Office.
    (ii) The seller shall agree not to encumber or cause any liens to be 
levied against the property.
    (iii) The seller shall agree not to commence or take any action to 
accelerate, forfeit, or foreclose the buyer's interest in the security 
property until a specified period of time after notifying the State 
Office of intent to do so. This period of time will be 90 days unless a 
State Supplement provides otherwise. The agreement shall give the agency 
the option to cure any monetary default by paying the amount of the 
buyer's delinquent payments to the seller, or paying the seller in full 
and having the contract assigned to the agency.
    (iv) The seller shall consent to the agency making the loan and 
taking a security interest in the borrower's interest under the land 
purchase contract as security for the agency loan.
    (v) The seller shall agree not to take any actions to foreclose or 
forfeit the interest of the buyer under the land purchase contract 
because the agency has acquired the buyer's interest under the land 
purchase contract by foreclosure or voluntary conveyance, or because the 
agency has subsequently sold or assigned the buyer's interest to a third 
party who will assume the buyer's obligations under the land purchase 
contract.
    (vi) When the agency acquires a buyer's interest under a land 
purchase contract by foreclosure or deed in lieu of foreclosure, the 
agency will not be deemed to have assumed any of the buyer's obligations 
under the contract, provided that the failure of the agency to perform 
any such obligations while it holds the buyer's interest is a ground to 
commence an action to terminate the land purchase contract.
    (5)-(6) [Reserved]
    (e) [Reserved]



1927.58  Closing the transaction.

    The closing agent will cooperate with the approval official, 
borrower, seller, and other necessary parties to arrange the time and 
place of closing. The transaction may be closed when the agency 
determines that the agency requirements for the loan have been satisfied 
and the closing agent or approved attorney can issue or cause to be 
issued a policy of title insurance or final title opinion as of the date 
of closing showing title vested as required by the agency, the lien of 
the agency's mortgage in the priority required by the agency, and title 
to the mortgaged property subject only to those exceptions approved in 
writing by the agency. The loan will be considered closed when the 
mortgage is filed for record and the required lien is obtained.
    (a) Disbursement of loan funds. When the closing agent indicates 
that the conditions necessary to close the loan have been met, loan 
funds will be forwarded to the closing agent. Loan funds will not be 
disbursed prior to filing of the mortgage for record; however, when 
necessary, loan funds may be placed in escrow before the mortgage is 
filed for record and disbursed after it is filed. No development funds 
will be kept in escrow by the closing agent after loan closing, unless 
approved by the agency. Loan funds for the payment of a lien may be 
disbursed only upon the recording of a discharge, satisfaction, or 
release of prior lien interests (or assignment where necessary to 
protect the interests of the agency).
    (b) Title examination and liens or claims against borrowers. If 
there are exceptions or recorded items which have arisen since the 
preliminary title opinion, the transaction will not be closed until 
these entries have been cleared of record or approved by the agency. The 
closing agent will advise the approval official of the nature of such 
intervening instruments and the effect they may have on obtaining a 
valid mortgage of the priority required or the title insurance policy to 
be issued.
    (c) Taxes and assessments. The closing agent will determine if all 
taxes and assessments against the property

[[Page 194]]

which are due and payable are paid at or before the time of loan 
closing. If the seller and the borrower have agreed to prorate any taxes 
or assessments which are not yet due and payable for the year in which 
the closing of the transaction takes place, the seller's proportionate 
share of the taxes and assessments will be deducted from the proceeds to 
be paid to seller at closing and will be added to the amount required to 
be paid by borrower at closing. Appropriate prorations as agreed upon 
between the borrower and seller may also be made for taxes paid by the 
seller which are applicable to a period after the closing date, and for 
common area maintenance fees, prepaid rentals, insurance (unless the 
borrower is to obtain a new policy of insurance), and growing crops.
    (d) Affidavit regarding work of improvement.--(1) Execution by 
borrower. If required by State Supplement, the closing agent will 
require that an affidavit regarding work of improvement, provided by the 
agency, be completed and executed when a loan is being made to a 
borrower who already owns the real estate to be mortgaged. This 
affidavit will be executed by the borrower at closing.
    (2) Execution by seller. If required by State Supplement, the 
closing agent will require that an affidavit regarding work of 
improvement, provided by the agency, be completed and executed 
(including acknowledgment) by the seller when the agency is making a 
loan to a borrower to enable the borrower to acquire the property 
(including transfers). This affidavit will be executed by the seller at 
closing.
    (3) Legal insufficiency of affidavit form. If the agency affidavit 
regarding work of improvement is not legally sufficient in a particular 
State, a State form approved by OGC will be used. A similar form that 
may be required by a title insurance company may be substituted for the 
agency form.
    (4) Recording. The affidavit will not be recorded unless the closing 
agent deems it necessary and State law permits.
    (5) Delay in closing. The loan will not be closed if, at the loan 
closing, the seller (in a sale transaction) or the borrower (in a 
nonpurchase money loan situation) indicates that construction, repair, 
or remodeling has been commenced or completed on the property, or 
related materials or services have been delivered to or performed on the 
property within the time limit specified in the affidavit, unless a 
State Supplement provides otherwise. The closing agent will notify the 
approval official, who will determine if the work of improvement could 
result in a lien prior to the agency lien. The State Office will, with 
the advice and concurrence of OGC, provide in a State Supplement the 
period of time to be used in completing the affidavit.
    (e)-(f) [Reserved]
    (g) Return of loan documents to approval official after loan 
closing. Within 1 day after loan closing, the closing agent will return 
completed and executed copies of the loan closing instructions, the 
executed original promissory note, and all other documents required for 
loan closing (except the mortgage), to the approval official. If the 
recorded mortgage is customarily returned to the borrower or closing 
agent after recording, then it must be forwarded to the approval 
official immediately.
    (h) Final title opinion or title insurance policy. As soon as 
possible after the transaction has been closed.
    (1) Final title opinion. The attorney will issue a final title 
opinion to the agency and the borrower on a form provided by the agency. 
Issuance of the final title opinion should not be held up pending the 
return of recorded instruments. If it is not possible for the final 
title opinion to show the book and page of recording of the agency 
security instrument, the words ``and is recorded'' in the final title 
opinion form provided by the agency office, may be deleted and the blank 
space completed to show the filing office and the filing instrument 
number, if available. Attached to the final title opinion will be 
required documents then available, including any which the approval 
official has furnished to the attorney which were not previously 
returned. The attorney will ensure that all recorded instruments are 
forwarded or delivered to the proper parties after recording. The 
certification of title will

[[Page 195]]

be forwarded for a voluntary conveyance.
    (2) Title insurance policy. The closing agent will send or deliver 
the title insurance policy, with the United States listed as mortgage 
holder, to the approval official. The policy will be subject only to 
standard exceptions and those outstanding encumbrances, and exceptions, 
approved by the approval official. If an owner's policy of title 
insurance is requested, the closing agent will send or deliver it to the 
borrower. The closing agent will ensure that all recorded instruments 
are delivered or sent to the proper parties after recording.
    (3) [Reserved]
    (i) Other services of the closing agent. (1) The closing agent will 
assist the approval official in preparing, completing, obtaining 
execution and acknowledgment, and recording the required documents when 
necessary. The closing agent will keep the approval official advised as 
to the progress of title clearance and preparation of material for 
closing the transaction.
    (2) The closing agent will provide services for deeds in lieu of 
foreclosure as set forth in Sec. 1927.62 of this subpart, and 
Sec. 1955.10 of subpart A of part 1955 of this chapter.



Sec. 1927.59  Subsequent loans and transfers with assumptions.

    Title services and closing for subsequent loans to an existing 
borrower will be done in accordance with previous instructions in this 
subpart, except that:
    (a) Loans closed using title insurance or title opinions. (1) Title 
insurance or title opinions will be obtained unless:
    (i) The cost of title services is excessive in relationship to the 
size of the loan,
    (ii) The agency currently has a first mortgage security interest,
    (iii) The applicant has sufficient income to service the additional 
loan,
    (iv) The borrower is current on the existing agency loan, and
    (v) The best mortgage obtainable adequately protects the agency 
security interests.
    (2) Title insurance or a final title opinion will not be obtained 
for a subsequent Section 504 loan where the previous Section 504 loan 
was unsecured or secured for less than $7,500 and the outstanding debt 
amount plus the new loan is less than $7,500.
    (3) Loans closed using a new lender title insurance policy:
    (i) Will cover the entire real property which is to secure the loan, 
including the real property already owned and any additional real 
property being acquired by the borrower with the loan proceeds.
    (ii) Will cover the entire amount of any subsequent loan plus the 
amount of any existing loan being refinanced (if the existing loan is 
not being refinanced, the new lender policy will insure only the amount 
of the subsequent loan).
    (b) Title services required in connection with assumptions. These 
regulations are contained in part 1965, subparts A, B, and C, of this 
chapter as appropriate for the loan type.

    Effective Date Note: At 67 FR 78327, Dec. 24, 2002, Sec. 1927.59 was 
amended in paragraph (b) by revising the words ``part 1965, subparts A, 
B, and C, of this chapter'' to read ``subparts A and B of part 1965 of 
this chapter and 7 CFR part 3550'' effective January 23, 2003.



Secs. 1927.60-1927.99  [Reserved]



Sec. 1927.100  OMB control number.

    The reporting requirements contained in this regulation have been 
approved by the Office of Management and Budget and have been assigned 
OMB control number 0575-0147. Public reporting burden for this 
collection of information is estimated to vary from 5 minutes to 1.5 
hours per response, with an average of .38 hours per response, including 
time for reviewing instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing this burden, to Department of 
Agriculture, Clearance Officer, OIRM, Ag Box 7630, Washington, DC 20250; 
and to the Office of Management and Budget, Paperwork Reduction Project 
(OMB 0575-0147), Washington, DC 20503. You are not required to 
respond to the collection of

[[Page 196]]

information unless it displays a currently valid OMB control number.



PART 1930--GENERAL--Table of Contents




Subparts A-B [Reserved]

    Subpart C--Management and Supervision of Multiple Family Housing 
                     Borrowers and Grant Recipients

Sec.
1930.101  General.
1930.102  Definitions.
1930.103  Nondiscrimination assurance.
1930.104  Reasonable accommodations.
1930.105  Objective of management and supervision.
1930.106  Project operations.
1930.107  [Reserved]
1930.108  Extent of borrower management.
1930.109  Extent of FmHA or its successor agency under Public Law 103-
          354 supervision.
1930.110  Methods of supervision.
1930.111-1930.112  [Reserved]
1930.113  Borrower responsibilities.
1930.114-1930.116  [Reserved]
1930.117  Agency responsibilities
1930.118  [Reserved]
1930.119  Supervisory visits, compliance review, and inspections.
1930.120-1930.121  [Reserved]
1930.122  Borrower accounting methods, management reporting and audits.
1930.123  Annual review.
1930.124  [Reserved]
1930.125  Changing project designation.
1930.126-1930.127  [Reserved]
1930.128  LH grants.
1930.129  RHS loans.
1930.130-1930.133  [Reserved]
1930.134  FmHA or its successor agency under Public Law 103-354 office 
          records.
1930.135-1930.136  [Reserved]
1930.137  State Supplements, guides, forms and other issuances.
1930.138  Supervisory actions for distressed projects.
1930.139-1930.140  [Reserved]
1930.141  Materials to be provided borrower/applicant.
1930.142  Complaints regarding discrimination in use and occupancy of 
          MFH.
1930.143  Delegation of responsibility and authority.
1930.144  Exception authority.
1930.145  Appeals.
1930.146-1930.149  [Reserved]
1930.150  OMB control number.

Exhibit A to Subpart C--Steps for Farmers Home Administration (FmHA) or 
          Its Successor Agency Under Public Law 103-354 Personnel in 
          Conducting Annual Review of Multiple Housing Operations
Exhibit A-1 to Subpart C--Audit Report Review Guide
Exhibit B to Subpart C--Multiple Housing Management Handbook
Exhibit B-1 to Subpart C--Management Plan Requirements for Farmers Home 
          Administration or Its Successor Agency Under Public Law 103-
          354 Financed Multiple Family Housing (MFH) Projects
Exhibit B-2 to Subpart C--Requirements for Management Agreements
Exhibit B-3 to Subpart C--Sample Management Agreement for Farmers Home 
          Administration or Its Successor Agency Under Public Law 103-
          354 Financed Multiple Family Housing (MFH) Projects
Exhibit B-4 to Subpart C--Outline for Prospective Management Agent of a 
          Multiple Family Rental or Labor Housing Project
Exhibit B-5 to Subpart C--Outline for Owner Who Proposes Owner-
          Management of a Multiple Family Rental or Labor Housing 
          Project
Exhibit B-6 to Subpart C--Monthly and Quarterly Project Management 
          Reports
Exhibit B-7 to Subpart C--Annual Project Management Reports
Exhibit B-8 to Subpart C--Miscellaneous Project Management Reports or 
          Submittals
Exhibit B-9 to Subpart C--Notice of Authorization To Withdraw and Use 
          Reserve Funds
Exhibit B-10 to Subpart C--Reserve Account Tally
Exhibit B-11 to Subpart C--Equal Housing Opportunity Logotype (Required 
          for Project Sign)
Exhibit B-12 to Subpart C--Farmers Home Administration or Its Successor 
          Agency Under Public Law 103-354 Logotype (Optional for Project 
          Sign)
Exhibit B-13 to Subpart C--International Symbol of Accessibility 
          (Required for Handicap Parking Space and Along Handicap 
          Accessibility Route)
Exhibit B-14 to Subpart C--Sample Waiting List
Exhibit C to Subpart C--Rental and Occupancy Charge and/or Utility 
          Allowance Changes
Exhibit C-1 to Subpart C--Notice to Tenants (Members) of Proposed Rent 
          (Occupancy Charge) and Utility Allowance Change
Exhibit C-2 to Subpart C--Notice of Approved Rent (Occupancy Charge) and 
          Utility Allowance Change
Exhibit D to Subpart C--Energy Audit
Exhibit D-1 to Subpart C--Calculation of Financial Impact (Energy Audit)
Exhibit E to Subpart C--Rental Assistance Program

[[Page 197]]

Exhibit F to Subpart C--Farmers Home Administration or Its Successor 
          Agency Under Public Law 103-354 Multiple Family Housing 
          Supervisory Visit--Pre-Visit Worksheet
Exhibit F-1 to Subpart C--Suggested Random Sampling Technique for Tenant 
          Reviews
Exhibit F-2 to Subpart C--Suggested Format for a Pre-Visit Tenant 
          Contact Letter
Exhibit G to Subpart C--Farmers Home Administration or Its Successor 
          Agency Under Public Law 103-354 Multiple Family Housing 
          Supervisory Visit--Summary of Findings
Exhibit G-1 to Subpart C--Farmers Home Administration or Its Successor 
          Agency Under Public Law 103-354 Multiple Family Housing 
          Supervisory Visit--Tenant File Review
Exhibit G-2 to Subpart C--Farmers Home Administration or Its Successor 
          Agency Under Public Law 103-354 Multiple Family Housing 
          Supervisory Visit--Tenant Interview and Unit Review
Exhibit H to Subpart C--Interest Credits on Insured Rural Rental Housing 
          and Rural Cooperative Housing Loans
Exhibit H to Subpart C-1--Example of Interest Credit Determination for 
          Rural Rental Housing or Rural Cooperative Housing Projects 
          (Plan II)
Exhibit I to Subpart C--Rural Rental Housing Loans and the Housing and 
          Urban Development Section 8 Rental Certificate and Rental 
          Voucher Programs (Existing Units)
Exhibit J to Subpart C--Management of Congregate Housing and Group Homes

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.

Subparts A-B [Reserved]



    Subpart C--Management and Supervision of Multiple Family Housing 
                     Borrowers and Grant Recipients

    Source: 58 FR 40868, July 30, 1993, unless otherwise noted.



Sec. 1930.101  General.

    This subpart prescribes the policies, authorizations, and procedures 
for management and supervision of all of the following Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
Multiple Family Housing (MFH) loan and grant recipients:
    (a) Farm Labor Housing (LH).
    (b) Rural Rental Housing (RRH) including congregate housing.
    (c) Rural Cooperative Housing (RCH).
    (d) Rural Housing Site Loans (RHS).
    (e) Special provisions and exceptions.
    (1) Unless otherwise specified in this subpart and except for 
exhibit C of this subpart, individual type RRH borrowers who were not 
required by program regulation to execute a loan agreement are exempted 
from the requirements of this subpart as long as the borrower is not in 
default of any program requirement, security instrument, payment, or any 
other agreement with FmHA or its successor agency under Public Law 103-
354. However, these borrowers must provide evidence of tenant income 
eligibility by properly completing Form FmHA or its successor agency 
under Public Law 103-354 1944-8, ``Tenant Certification,'' for each 
tenant as required by the Forms Manual Insert (FMI), except in LH 
situations where the tenant is not paying rent.
    (2) The State Director may require any borrower determined to be in 
default of any program requirement, security instrument, payment, or 
other agreement with FmHA or its successor agency under Public Law 103-
354, or when otherwise failing to meet the program objectives, to comply 
with any appropriate section of this subpart to assure that the loan 
objectives are met.
    (3) For RHS borrowers, the following sections of this subpart do not 
apply: Secs. 1930.108, 1930.122, and 1930.141.



Sec. 1930.102  Definitions.

    Acceptable tolerance. For the purpose of this subpart, acceptable 
tolerance means actual financial activity as expressed in numeric terms 
that is operating within plus or minus 5 percent of projected or 
forecasted estimates.
    Adviser to the board. An individual or organization who will work 
with and provide guidance to a cooperative board of directors.
    Borrowers. Borrowers means owners who may be individuals, 
partnerships, cooperatives, trusts, public agencies, private or public 
corporations, and other organizations who have received

[[Page 198]]

a loan or grant from FmHA or its successor agency under Public Law 103-
354 for LH, RRH, RCH, or RHS purposes.
    Consumer cooperative. A corporation which is organized under the 
cooperative laws of a State or Federally recognized Indian tribe; will 
own and operate the housing on a cooperative basis solely for the 
benefit of the members; will operate at cost and, for this purpose, any 
patronage refunds accruing to members in accordance with subpart E of 
part 1944 of this chapter will not be considered gains or profits; and 
will restrict membership in the housing to eligible persons and, to any 
extent the cooperative and FmHA or its successor agency under Public Law 
103-354 permit, to others in special circumstances.
    FmHA or its successor agency under Public Law 103-354. FmHA or its 
successor agency under Public Law 103-354 means the United States of 
America acting through the Farmers Home Administration or its successor 
agency under Public Law 103-354 or FmHA or its successor agency under 
Public Law 103-354's predecessor agencies.
    Governing body. Governing body means those elected or appointed 
officials of an organization or public agency type borrower responsible 
for the operations of the project.
    Management. Management is the overall direction given by the 
borrower or the borrower's agent to meet the needs of the tenants or 
members, maintain the project, and provide sound and economical project 
operation.
    Member. A person who has executed documents pertaining to a 
cooperative housing type of living arrangement and has made a commitment 
to upholding the cooperative concept.
    Occupancy agreement. A contract setting forth the rights and 
obligations of the cooperative member and the cooperative, including the 
amount of the monthly occupancy charge and the other terms under which 
the member will occupy the housing.
    Office of the General Counsel (OGC). OGC means the Regional 
Attorney, Associate Regional Attorney, or Assistant Regional Attorney in 
the field office of the Office of the General Counsel of the United 
States Department of Agriculture (USDA).
    Office of Inspector General (OIG). OIG means the Office of Inspector 
General of the USDA.
    Patronage capital refund. Amounts received by the cooperative in 
excess of operating costs and expenses which have been assigned to 
members' patronage capital accounts each year of membership in the 
cooperative.
    Project. A project is the total number of rental housing units that 
are operated under one management plan with one loan agreement/
resolution. (The rental units may have been developed originally with 
separate initial loans and separate loan agreements/resolutions, now 
consolidated into one operational project under Sec. 1965.68 of subpart 
B of part 1965 of this chapter.)
    Servicing Office. The FmHA or its successor agency under Public Law 
103-354 office designated by the State Director to service MFH accounts.
    Servicing Official. The individual who by job description or other 
qualification is designated by the State Director with delegated 
responsibility to service MFH accounts.
    State Director. For the purpose of this subpart, State Director also 
includes the Rural Housing Chief, Multiple Family Housing Coordinator, 
Rural Housing Specialist, and other qualified State staff when delegated 
responsibilities under this subpart according to Sec. 1930.143 and the 
provisions of FmHA or its successor agency under Public Law 103-354 
Instruction 2006-F, (available in any FmHA or its successor agency under 
Public Law 103-354 office).
    Supervision. Supervision includes the broad scope of FmHA or its 
successor agency under Public Law 103-354 guidance available to assist 
borrowers to carry out the objectives of the loan and comply with FmHA 
or its successor agency under Public Law 103-354 regulations.



Sec. 1930.103  Nondiscrimination assurance.

    All management and supervision actions described in this subpart 
will be conducted without regard to race, color, religion, sex, familial 
status, national origin, age, or handicap. Borrowers, tenants and 
cooperative members must possess the legal capacity to

[[Page 199]]

enter into a legal contract. The provisions of subpart E of part 1901 of 
this chapter enforcing title VI of the Civil Rights Act of 1964, as 
amended, along with other similarly worded statutes will be complied 
with.



Sec. 1930.104  Reasonable accommodations.

    (a) It shall be unlawful for any person to refuse to make reasonable 
accommodations in rules, policies, practices, or services when such 
accommodations would afford an individual with a handicap equal 
opportunity to use or continue to use and enjoy a dwelling unit, 
including public and common use areas.
    (b) It shall be unlawful for any person to refuse to permit, at the 
expense of an individual with a handicap, reasonable modifications of an 
existing unit, occupied or to be occupied by an individual with a 
handicap, if the proposed modifications may be necessary to afford the 
individual with a handicap full enjoyment of the dwelling unit.



Sec. 1930.105  Objective of management and supervision.

    (a) The primary objective of management and supervision is to 
provide effective supervision to each borrower to accomplish the 
objectives of the loan or grant.
    (b) To provide effective supervision, FmHA or its successor agency 
under Public Law 103-354 will assure that the borrower's management plan 
accomplishes the following:
    (1) Provide proper and efficient management policies as prescribed 
in exhibit B of this subpart.
    (2) Comply with loan and grant agreements.
    (3) Repay loans on schedule.
    (4) Maintain security property.
    (5) Protect the interests of FmHA or its successor agency under 
Public Law 103-354.
    (6) Operate facilities according to State and local laws and 
regulations.
    (7) Maintain accounts and records.
    (8) Submit reports and audits.
    (9) Process rent and occupancy charge changes according to exhibit C 
of this subpart.
    (10) Operate the facilities according to applicable Civil Rights 
laws, Title VI of the Civil Rights Act of 1964, Title VIII of the Civil 
Rights Act of 1968, Section 504 of the Rehabilitation Act of 1973, 
Executive Order 11246, the Americans with Disabilities Act of 1990, and 
the Age Discrimination Act of 1975.
    (11) Maintain facilities and premises that are free of illegal 
controlled substances.
    (12) Collect and remit any occupancy surcharges as applicable.

[58 FR 40868, July 30, 1993, as amended at 62 FR 25065, May 7, 1997]



Sec. 1930.106  Project operations.

    Project operations shall be conducted to meet the actual needs and 
necessary expenses of the property or for any other purpose authorized 
under Agency regulations. Whoever willfully uses, or authorizes the use, 
of any part of the rents, assets, proceeds, income, or other funds 
derived from such property for unauthorized purposes is subject to 
penalty. This includes an owner, agent, or manager, or person who is 
otherwise in custody, control, or possession of property that is 
security for a multifamily housing loan. Those violating these 
provisions are subject to penalties set out under Agency regulations and 
the law. Under law (42 U.S.C. 1484 and 1485) federal penalties 
consisting of fines of not more than $250,000 or imprisonment of not 
more than five years, or both, may be imposed for operating a project in 
a manner inconsistent with the provisions of this section.

[62 FR 25065, May 7, 1997]



Sec. 1930.107  [Reserved]



Sec. 1930.108  Extent of borrower management.

    According to exhibit B of this subpart, the borrower and/or the 
borrower's agent will develop a management plan for each project that 
describes the scope of property management needed to maintain program 
objectives. When the management is from other than the borrower, a 
management agreement will be used to define the responsibilities of the 
management agent. Initial, modified and/or replacement management 
agreements will be approved by authorized FmHA or its successor agency 
under Public Law 103-

[[Page 200]]

354 officials. A sample management agreement is provided in exhibit B-3 
of this subpart.



Sec. 1930.109  Extent of FmHA or its successor agency under Public Law 103-354 supervision.

    The objective of FmHA or its successor agency under Public Law 103-
354 supervision is to guide and advise borrowers and their designated 
representatives in their quest to meet MFH program objectives, goals, 
and obligations, not to direct the borrower's activity. Supervision does 
not relieve borrowers of their own responsibilities and obligations. 
Supervision starts with the first contact by the applicant and continues 
as long as any loan balance remains outstanding. In the case of a grant, 
supervision continues until the requirements of the grant agreement have 
been fulfilled. Supervision of borrowers is a primary responsibility of 
the Servicing Official; however, additional supervision and guidance 
will be given by the State Director and/or other appropriate members of 
the State Office staff. Security servicing actions will be handled 
according to subpart B of part 1965 of this chapter.



Sec. 1930.110  Methods of supervision.

    Supervisory methods used by FmHA or its successor agency under 
Public Law 103-354 employees include organizational and development 
planning; property management planning; affirmative marketing; 
construction conferences; long-term, annual, and other periodic planning 
and evaluation; accounts, budgets, and records inspections and guidance; 
project inspections; attendance at membership and governing body 
meetings; periodic group meetings with borrowers; analysis of 
accounting, budgets, and audit reports; guidance by memorandums; and 
similar activities. Supervision of cooperative borrowers will include 
coordination with the adviser to the board. Supervision of grant-only 
recipients will consist of at least the reviews and inspections outlined 
in Sec. 1930.119 of this subpart.
    (a) Applicants. Prior to loan or grant closing, supervision will 
largely be conducted during conferences and meetings with prospective 
borrowers and their various representatives such as applicant's 
attorney, architect, property manager, etc. Examples of supervision 
include:
    (1) Organizational meetings to discuss needs, services available, 
owner obligations, and to establish organizational committees.
    (2) Preapplication and application conferences.
    (3) Preconstruction conferences to reach an understanding regarding 
responsibilities and the manner in which development will be performed. 
The applicant at this point should be made fully aware of the 
responsibilities detailed in Sec. 1930.103 of this subpart.
    (4) Preloan and/or grant closing conferences to review requirements 
of the loan resolution or agreement, closing requirements, and 
management plan and to establish responsibilities for the operation of 
the project. The applicant at this point should be made fully aware of 
the responsibilities entailed in Sec. 1930.103 of this subpart.
    (5) Preoccupancy conferences to review the management plan, 
marketing plan, and the general readiness of project facilities, 
recordkeeping systems, renting or occupancy procedures, and personnel 
assignments to begin project operation. This conference will be 
conducted according to Sec. 1944.235(h) of subpart E of part 1944 of 
this chapter.
    (b) Borrowers who have yet to demonstrate their ability and 
borrowers with problems. When the borrower is establishing its 
operations, or when borrowers are delinquent, or have other 
difficulties, supervisory guidance will include:
    (1) Implementation and/or review for compliance with the management 
plan.
    (2) Establishment and maintenance of a financial recordkeeping and 
reporting system.
    (3) Compliance with the requirements of the loan agreement or loan 
resolution.
    (4) Review of annual audit and budget requirements.
    (5) Any other supervision that may be necessary to assure effective 
and successful operation of the project.
    (6) A requirement that the borrower contract with a management firm 
with proven background and/or experience

[[Page 201]]

in property management. In the case of cooperative housing, this 
stipulation will apply only when it has been determined that the 
cooperative is unable to manage itself.
    (c) Borrowers who have demonstrated ability. Supervision will 
consist of at least an annual review of budgets and other management 
reports according to Sec. 1930.122, and a triennial supervisory visit 
according to Sec. 1930.119 of this subpart when the borrower is:
    (1) Successful in completing a first full fiscal year of operation.
    (2) Current with loan payments.
    (3) In compliance with other loan or grant requirements.
    (4) Maintaining the security in a satisfactory manner.
    (5) Otherwise progressing satisfactorily.



Secs. 1930.111-1930.112  [Reserved]



Sec. 1930.113  Borrower responsibilities.

    Borrower responsibilities are described in paragraph III of exhibit 
B of this subpart.



Secs. 1930.114-1930.116  [Reserved]



Sec. 1930.117  Agency responsibilities.

    Effective supervision requires FmHA or its successor agency under 
Public Law 103-354 employees to be familiar with the various types of 
borrowers and their management plan; to communicate effectively with 
borrowers and their management agent, when applicable; and to provide 
guidance in the operation and management of MFH projects.
    (a) Servicing Official. Servicing Officials are responsible for 
effective borrower supervision. Servicing Officials will:
    (1) Organize their work and the work of their staffs in order that 
time is used effectively in providing borrower supervision and place 
emphasis on supervisory visits and review of borrower management 
reports.
    (2) Emphasize to the borrower and/or the borrower's management agent 
that they, not FmHA or its successor agency under Public Law 103-354, 
are responsible for managing the project, planning and following budgets 
within acceptable tolerance, collecting rents or occupancy charges, 
repaying the loan on schedule, budgeting for adequate project operations 
and maintenance; and for compliance with any loan or grant agreement or 
resolution, State laws, and other FmHA or its successor agency under 
Public Law 103-354 requirements.
    (3) Monitor all provisions or conditions of the FmHA or its 
successor agency under Public Law 103-354 approval documents to ensure 
that they are fully complied with throughout the life of the project.
    (4) Monitor the borrowers' compliance with FmHA or its successor 
agency under Public Law 103-354 regulations concerning real property 
tax, insurance, bonding, security, budgeting, and reporting 
requirements.
    (5) Systematically monitor response to OIG report findings at 
specific intervals and/or during routine supervisory visits, compliance 
reviews, and physical inspections.
    (6) Assure that borrower financing statements are continued and not 
allowed to lapse.
    (7) Have each borrower designate a representative to serve as its 
contact source for Agency communication on project related matters.
    (8) Become familiar with the borrower's bylaws or other rules and 
regulations when necessary to assure compliance with FmHA or its 
successor agency under Public Law 103-354 program civil rights and Fair 
Housing Act requirements.
    (9) Provide borrower governing bodies with suggestions for 
information distribution that may be helpful in keeping the membership 
in touch with activities to increase and maintain membership interest.
    (10) Provide informed advice and guidance to borrowers as needed.
    (11) Identify problem borrower accounts and initiate servicing plans 
including workout agreements with the borrower according to exhibit F of 
subpart B of part 1965 of this chapter.
    (12) Gather, maintain, analyze, and distribute a database of actual 
MFH operation and maintenance expense for determination of expense 
reasonableness that reflects variables of project operation and 
characteristics.
    (13) Avoid doing any of the following:

[[Page 202]]

    (i) Try to run the borrower's business.
    (ii) Take charge of the borrower's meetings.
    (iii) Attempt to supervise the borrower only through its attorney, 
architect, or management agent.
    (iv) Presume that projects without adverse complaints do not require 
monitoring and/or supervision by FmHA or its successor agency under 
Public Law 103-354.
    (b) State Director. State Directors will:
    (1) Coordinate and direct supervisory activities related to 
borrowers and perform other functions as prescribed by this subpart.
    (2) Provide guidance and leadership to assure that the State staff 
and Servicing staff thoroughly understand and carry out their 
responsibilities.
    (3) Develop and conduct training programs necessary to assure that 
FmHA or its successor agency under Public Law 103-354 personnel are kept 
up-to-date regarding the most effective supervisory methods, that the 
proper time is allotted to supervision, and that borrowers receive 
adequate supervision and financial counseling.
    (4) Establish and maintain a system to monitor followup to findings 
in OIG reports, supervisory visits, compliance reviews, physical 
inspections, or other factual sources.
    (5) Maintain necessary liaison with the OGC.
    (6) Maintain necessary liaison with State and local authorities, 
agencies, and other organizations. For example, in the case of projects 
benefiting the elderly, it is essential that liaison be maintained with 
the aging network such as State and Area Agencies on Aging to assure 
that available support services are offered to or accessible by the 
tenants.
    (7) Maintain and update State Office records for effective program 
supervision and evaluation.
    (8) Assist the Servicing Official in developing a realistic plan to 
resolve project operational problems.
    (c) State staff. State staff members who are designated by the State 
Director as MFH Servicing Officials responsible for supervision of 
borrowers covered by this subpart will:
    (1) Continuously monitor supervisory and account servicing 
activities and borrower status to assure that each project is receiving 
timely and effective supervision.
    (2) Train staff to effectively perform the required supervisory and 
account servicing activities, and to provide informed guidance in sound 
operation and management policies. The assistance of the aging network 
such as State and Area Agencies on Aging should be sought in connection 
with training which pertains to the management of services to the 
elderly.
    (3) Post review closing of loans and grants to determine that they 
have been properly closed.
    (4) Visit a sufficient number of projects to assure that proper 
supervision and account servicing is being provided.
    (5) Assemble, analyze, and distribute a statewide database of actual 
MFH operation and maintenance costs for determination of cost 
reasonableness that reflects variable characteristics of project 
operation.



Sec. 1930.118  [Reserved]



Sec. 1930.119  Supervisory visits, compliance reviews, and inspections.

    (a) Purpose. Servicing Officials and other FmHA or its successor 
agency under Public Law 103-354 authorized persons will visit the MFH 
project site, including the management office, as necessary to 
accomplish the objectives of the loan or grant. Following are the major 
purposes for which visits may be made:
    (1) To assist with satisfactory development of the project.
    (2) To evaulate the management program of the project pursuant to 
exhibit B of this subpart, such as:
    (i) Adherence to the management plan.
    (ii) Compliance with the management agreement when applicable.
    (iii) To review compliance with the Affirmative Fair Housing 
Marketing Plan and/or the Equal Opportunity requirements of title VI of 
the Civil Rights Acts of 1964, the Civil Rights Act of 1968 as amended 
by the Fair Housing Amendments Act of 1988, section 504 of the 
Rehabilitation Act of

[[Page 203]]

1973, and the Age Discrimination Act of 1975.
    (3) To review borrower records and verify required compliance and 
information, such as:
    (i) Tenant or member eligibility.
    (ii) Tenant or member income.
    (iii) Tenant or member selection criteria.
    (iv) Waiting lists.
    (v) Rental or occupancy rates are in accordance with an FmHA or its 
successor agency under Public Law 103-354 approved budget.
    (vi) Other necessary items.
    (4) To inspect and ascertain proper maintenance and assure 
protection of the security for the FmHA or its successor agency under 
Public Law 103-354 loan.
    (5) To determine if the project is being operated according to the 
approved budget.
    (6) To determine that borrower and/or borrower's managment agent is 
fully complying with all provisions and conditions of the approval 
document regarding site development and use restrictions.
    (7) In the case of all LH borrowers, including on-farm LH, to 
determine that the housing is serving domestic farm laborers, as defined 
by paragraph II of exhibit B of this subpart, and that the LH housing 
provided is decent, safe, and sanitary.
    (b) Frequency and standards. Visits will be made as follows:
    (1) Supervisory visits will be made as needed to assure compliance 
with FmHA or its successor agency under Public Law 103-354 policies and 
objectives. A Servicing staff person or other FmHA or its successor 
agency under Public Law 103-354 authorized person will perform a post 
rent-up or occupancy visit before the end of the first 90 days of 
operation; and a thorough supervisory visit no later than 12 months 
following the post occupancy visit, and at least every 36 months 
thereafter at each project.
    (i) More frequent visits to delinquent or problem projects, 
irrespective of loan type, should be scheduled as needed.
    (ii) In the case of borrowers with on-farm LH unit(s) or LH 
borrowers providing seasonal farm labor housing, such visits should be 
made during the season of occupancy and preferably during an annual farm 
visit.
    (iii) Planned visits will be included in the monthly work calendar.
    (iv) The visit shall be conducted with the borrower and/or the 
borrower's designated representative.
    (v) Exhibits F, F-1, F-2, G, G-1, and G-2 of this subpart should be 
used to assist in the preparation, completion, and followup of visits.
    (vi) For small rental projects consisting of only a few units 
(usually 1 to 3), the degree of completion of exhibits F, G, G-1 and G-2 
may be minimized. Supervisory visits to such projects are required only 
once every three years and should concentrate on tenant eligibility, 
income and adjustments to income verification, maintenance, insurance 
coverage, and status of loan payments.
    (2) The Servicing Official or other FmHA or its successor agency 
under Public Law 103-354 authorized person will conduct an inspection of 
each project at least once every 36 months with the borrower, site 
manager, or designated representative present.
    (i) This inspection may be made simultaneously with a supervisory 
visit scheduled in accordance with this section.
    (ii) The results of the inspection will be documented on HUD Form 
9822, ``Report of Physical Condition and Estimate of Repair Costs,'' or 
a similar form for the same purpose may be used for this inspection.
    (iii) Based on the Servicing person's knowledge, without further 
research, the estimated repair need and cost columns of the form will be 
completed during the inspection visit.
    (c) Preparation. The person planning to make the visit and 
inspection will review the most recent quarterly or annual reports, the 
running records, correspondence, and other Servicing Office records to 
be fully aware of the supervisory needs of the project. This awareness 
should be developed into an informal visit plan and include, but not be 
limited to such things as; payment status, subsidy status, due dates of 
taxes and insurance, adequacy of fidelity coverage, and any known 
maintenance problems.

[[Page 204]]

    (d) Notice of visit or inspection. The management agent, or when 
applicable, the owner should receive a written notice of the scheduled 
visit or inspection from the Servicing Office 30 days before the event 
to insure that needed records and staff are available (see Guide Letter 
1930-2 for borrower notification.)
    (e) Conducting visit or inspection. The person making the visit or 
inspection should spend sufficient time at the project to accomplish the 
visit plan and any additional needs that are observed or brought out by 
the tenants, members, or management staff.
    (f) Recording, reporting and followup. The preparation notes and 
results of each visit should be recorded on exhibits F, G, G-1 and G-2 
of this subpart and filed in the borrower's servicing file. A letter 
highlighting any needed followup actions and a copy of the completed 
supervisory visit checklist will be directed to the management agent 
and/or the borrower within 30 days after the visit. Followup will 
continue through resolution of any problems. Any major problems with the 
project will be reported in writing to the State Director with 
recommendations for corrective action. Exhibit A to subpart A of part 
1955 of this chapter or Form FmHA or its successor agency under Public 
Law 103-354 1955-2, ``Report on Real Estate Problem Case,'' may be used 
as appropriate.
    (g) Compliance reviews. As authorized State or Servicing staff 
member or other FmHA or its successor agency under Public Law 103-354 
authorized person will complete the Civil Rights and Fair Housing review 
requirements according to subpart E of part 1901 of this chapter. If 
initial rent-up or occupancy has not occurred by the time of initial 
review, a subsequent review will be due one year following initial 
occupancy and then every 36 months thereafter or in accordance with 
subpart E of part 1901 of this chapter.



Secs. 1930.120-1930.121  [Reserved]



Sec. 1930.122  Borrower accounting methods, management reporting and audits.

    It is the objective of FmHA or its successor agency under Public Law 
103-354 that borrowers will maintain accounts and records necessary to 
conduct their operation successfully and from which they may accurately 
report operational results to FmHA or its successor agency under Public 
Law 103-354 for review, and otherwise comply with the terms of their 
loan agreements with the Agency. Borrower accounts and records will be 
kept or made available in a location within reasonable access for 
inspection, review, and copying by representatives of FmHA or its 
successor agency under Public Law 103-354 or other agencies of the U.S. 
Department of Agriculture authorized by the Department.
    (a) Accounting methods and records--(1) Method of accounting and 
financial statements. Borrowers may choose a cash or accrual method of 
accounting, bookkeeping, and budget preparation as described in their 
project management plan, unless otherwise specified in a work-out plan 
as part of a servicing action. Balance sheets or statements of financial 
condition may be prepared reflecting the same accounting method, except 
that the accrual method of reporting financial condition will be used 
where the borrower is required to submit an annual audit.
    (2) Approval requirement. Before loan closing or start of 
construction, whichever is first, each borrower shall incorporate a 
description of its method of accounting, bookkeeping, budget 
preparation, and reporting of financial condition and, when applicable, 
plans for auditing, in the project management plan that must be approved 
by FmHA or its successor agency under Public Law 103-354.
    (3) Records. Form FmHA or its successor agency under Public Law 103-
354 1930-5, ``Bookkeeping System-Small Borrower,'' may be used by small 
organizations as a method of recording and maintaining accounting 
transactions. Automated systems may be used if they meet the conditions 
of paragraph XVI of exhibit B of this subpart.
    (4) Record retention. Each borrower shall retain all financial 
records, books, and supporting material for 3 years after the issuance 
of the audit reports and financial statements. Upon request, this 
material will be made available to FmHA or its successor agency under 
Public Law 103-354, the

[[Page 205]]

OIG, the Comptroller General, or to their representatives.
    (b) Management reports and review processes. The objective of 
management reports and review processes is to furnish the management and 
FmHA or its successor agency under Public Law 103-354 with a means of 
evaluating prior decisions and to serve as a basis for planning future 
operations and financial conditions. Timely reports and their review 
furnish necessary information to make sound management decisions. All 
reports will relate only to the FmHA or its successor agency under 
Public Law 103-354 financed project and borrower entity. Separate 
reports will be prepared and submitted for each project owned by the 
same borrower. Forms necessary in making the required reports may be 
requested from FmHA or its successor agency under Public Law 103-354. 
The various review processes described in this paragraph are illustrated 
at Sec. 1930.123(i) of this chapter.
    (1) Annual budget and utility allowance--(i) Objective. It is the 
objective of FmHA or its successor agency under Public Law 103-354 that 
project budgets and/or utility allowances be prepared, reviewed, and 
approved in such manner and timing that the approved budget and/or 
utility allowance, including any authorized changes to same, become 
effective on the beginning of a fiscal year of project operation.
    (ii) Documents. (A) The annual project budget will be prepared on 
Form FmHA or its successor agency under Public Law 103-354 1930-7, 
``Multiple Family Housing Project Budget,'' by the borrower or its agent 
following the instructions on the form. It will reflect budget planning 
for a 12 month fiscal year. Figures in the ``actual'' column will 
reflect at least 9 months of actual fiscal year activity and no more 
than 3 months of estimated activity for the balance of the same fiscal 
year based on recent actual experience.
    (B) When tenants pay their own utilities, the housing allowance for 
utilities and other public services will be prepared on exhibit A-6 to 
subpart E of part 1944 of this chapter. Exhibit A-6 will be prepared by 
the borrower or its agent following instructions attached to the exhibit 
and will be submitted to FmHA or its successor agency under Public Law 
103-354 together with Form FmHA or its successor agency under Public Law 
103-354 1930-7 with justification to either retain or change the utility 
allowance.
    (iii) Supporting data. Any data, justification, or other 
documentation required by the instructions for preparation of Form FmHA 
or its successor agency under Public Law 103-354 1930-7 and exhibit A-6 
to subpart E of part 1944 of this chapter, or otherwise required by the 
Servicing Official on an individual case basis, shall be ttached to the 
respective document when submitted to the Servicing Office.
    (iv) Due date. The borrower can submit the necessary documents as 
soon as 9 months of current fiscal year actuals are available, but in 
sufficient time to meet the objective stated in (b)(1)(i) of this 
section. The Servicing Official needs 15 to 30 days to review project 
budgets and utility allowances when no changes of rents, occupancy 
charges, or utility allowances are needed. When such changes are needed, 
the borrower needs to submit documents to allow sufficient time for 
review and proper notice of change to tenants or members.
    (v) FmHA or its successor agency under Public Law 103-354 review. 
Form FmHA or its successor agency under Public Law 103-354 1930-7 and 
exhibit A-6 to subpart E of part 1944 of this chapter and any attachment 
will be reviewed by the Servicing Office as part of the rental or 
occupancy charge/utility allowance change review and/or annual review 
process.
    (2) Rental or occupancy charge budget and/or utility allowance 
change--(i) Objective. It is the objective of FmHA or its successor 
agency under Public Law 103-354 that changes to project rental or 
occupancy charges and/or utility allowances be incorporated into the 
annual budget review and planning process in such manner and timing that 
authorized changes become effective at the beginning of a fiscal year of 
project operation.
    (ii) Documents. When a rental or occupancy charge and/or utility 
allowance change is proposed, the borrower or its agent will prepare and 
submit Form FmHA or its successor agency under

[[Page 206]]

Public Law 103-354 1930-7 and exhibit A-6 to subpart E of part 1944 of 
this chapter and any supporting attachments following the instructions 
for either document.
    (iii) Standards and timing. (A) The policies and procedures 
governing rental or occupancy charge and/or utility allowance change are 
contained in exhibit C of this subpart, (available in any FmHA or its 
successor agency under Public Law 103-354 office or the ``Borrower 
Handbook'' made up of selected exhibits of this subpart and parts of 
this chapter).
    (B) To meet the projected effective date of change, the necessary 
documents need to be received by the Servicing Official at least 75 days 
ahead of the effective date of change to allow FmHA or its successor 
agency under Public Law 103-354 review to authorize a 60 day notice to 
tenants or members of an impending change. The ``actual'' column of Form 
FmHA or its successor agency under Public Law 103-354 1930-7 shall 
contain actual data for the fiscal year to date plus the projection of 
expected data for the remainder of the fiscal year. This projection 
should cover a period not exceeding 90 days. The same supporting data 
standards of paragraph (b)(1)(iii) of this section will apply.
    (C) Should the borrower need to request a rental or occupancy charge 
and/or utility allowance change at some time other than described in 
paragraph (b)(2)(iii)(B) of this section, e.g., mid-fiscal year, Form 
FmHA or its successor agency under Public Law 103-354 1930-7 shall 
reflect the project's financial needs for the next 12 months of 
operation and the ``actual'' column shall reflect the most recent 12 
months of actual data. The previous fiscal year's audit report, or Form 
FmHA or its successor agency under Public Law 103-354 1930-8, ``Multiple 
Family Housing Borrower Balance Sheet,'' as appropriate, shall be 
submitted with the change request if it was not previously submitted to 
the Servicing Office.
    (iv) FmHA or its successor agency under Public Law 103-354 review. 
Exhibit C of this subpart shall govern FmHA or its successor agency 
under Public Law 103-354 review of the borrower's request for rental or 
occupancy charge and/or utility allowance change.
    (3) Quarterly report--(i) Objective. The objective of FmHA or its 
successor agency under Public Law 103-354 is for quarterly reports to 
provide a monitoring means for borrowers and FmHA or its successor 
agency under Public Law 103-354 to mutually check a borrower's progress 
in achieving program objectives and when applicable, meeting servicing 
goals.
    (ii) Document. Form FmHA or its successor agency under Public Law 
103-354 1930-7 will be used by borrowers to prepare the quarterly 
report.
    (iii) Standards. Form FmHA or its successor agency under Public Law 
103-354 1930-7 will be completed following the instructions on the form 
for preparation of a quarterly report. The quarterly report shall be 
required upon commencement of any of the following situations:
    (A) Start up of initial occupancy after completion of new 
construction or substantial rehabilitation.
    (B) Reamortization, transfer of an existing project loan or a 100 
percent membership change.
    (C) Failure to make a scheduled loan payment, failure to maintain 
required transfers to the reserve account, or failure to maintain 
reserve accounts at authorized current levels.
    (D) Existence of reasons stated in paragraph (b)(3)(iv)(B) of this 
section when quarterly reports will suffice in place of monthly reports.
    (iv) Frequency and discontinuance--(A) Quarterly reports. Quarterly 
reports shall be prepared and submitted for each quarter year at least 
through the first year of operation for any situation described in 
paragraph (b)(3)(iii) of this section and each quarter year thereafter 
for new or existing projects until discontinuance is authorized by the 
Servicing Official. The Official will evaluate the following in reaching 
a decision to discontinue:
    (1) An adequate accounting system is functioning properly, is kept 
current, and the most recent required annual financial reports are 
complete and have been submitted to the Servicing Office.
    (2) Project loan payments to FmHA or its successor agency under 
Public Law 103-354 are on schedule.

[[Page 207]]

    (3) The project reserve account is ahead or on schedule, allowing 
for authorized expenditures or authorized reduction in funding as set 
forth in an approved servicing plan or budget.
    (4) The annual review has been completed by the Servicing Office and 
the annual audit, or verification of review when appropriate, has been 
found acceptable.
    (5) The Servicing Official has inspected the project, reviewed 
project operations, and found them acceptable. When this and the 
preceding determinations are made, a letter of discontinuance of the 
quarterly report shall be sent to the borrower or its agent with a copy 
sent to the State Director.
    (B) Monthly reports. Preparation and submission of the reports 
described in this paragraph may be required monthly at the option of the 
Servicing Official, rather than quarterly, when warranted in unusual 
situations.
    (1) This requirement may be invoked when determined essential by the 
Servicing Official as part of a servicing plan made in accordance with 
exhibit F of subpart B of part 1965 of this chapter (available in any 
FmHA or its successor agency under Public Law 103-354 office).
    (2) Reasons for invoking the reporting requirement on a monthly 
basis may include, but not be limited to, factors such as apparent 
violations of policy or reporting practices, audit findings, sudden 
increases of vacancy and/or accounts payable or receivables, or other 
evidence of weak financial condition.
    (v) Due date. Quarterly (or monthly) reports shall be due in the 
FmHA or its successor agency under Public Law 103-354 Servicing Office 
by the 20th day of the month immediately following the close of the 
respective reporting period.
    (vi) FmHA or its successor agency under Public Law 103-354 review. 
(A) The Servicing Official will review the reports for year-to-date 
status of project operations. When reports reveal actual data that 
exceeds acceptable tolerance from a forecasted budget SUBTOTAL item, or 
vacancies and accounts receivable and/or payable are increasing, the 
Servicing Official will initiate verbal and/or written dialogue with the 
borrower for further resolution of problems or to otherwise achieve 
acceptable progress.
    (B) The Servicing Official will complete the FmHA or its successor 
agency under Public Law 103-354 review and forward the borrower's report 
and any related documentation to the State Director by the 30th day of 
the month following close of the reporting period.
    (C) If the borrower fails to submit its report by the due date, this 
fact will be reported to the State Director by the 30th day of the month 
following the close of the reporting period: otherwise, the Servicing 
Office will complete its review of a submitted report no later than 10 
calendar days following receipt of the borrower's report.
    (4) Annual audit reports and verifications of review--(i) Documents 
and general standards--(A) Annual audit report. An audit report will be 
in the format as prepared by a Certified Public Accountant (CPA) or 
Licensed Public Accountant (LPA), provided the LPA was licensed on or 
before December 31, 1970.
    (1) All audits are to be performed in accordance with generally 
accepted government auditing standards, as set forth in ``Government 
Auditing Standards'', established by the Comptroller General of the 
United States, and any subsequent revisions (this publication is 
commonly referred to as the ``Yellow Book'' or ``General Accounting 
Office Standards''). In addition, the audits are also to be performed in 
accordance with applicable portions of various Office of Management and 
Budget (OMB) Circulars, Departmental Regulations, parts 3015 and 3016 of 
chapter XXX of title 7, and the FmHA or its successor agency under 
Public Law 103-354 Audit Program as specified in separate sections of 
this subpart.
    (2) An audit report is required for any project with 25 or more 
units unless the State Director or Servicing Official determines that a 
project with 24 or fewer units requires an audit for reasons of good 
cause. Such reasons include, but are not limited to, situations where 
project records are incomplete or inaccurate, or it appears that the 
borrower has not adequately accounted for project funds, or where the

[[Page 208]]

borrower's operation consists of multiple projects where each project is 
24 or fewer units (with subsidiary reports prepared for each project).
    Note: The State Director or Servicing Official may require that the 
accounts of RHS borrowers be audited if the loan exceeds the 2-year 
repayment term.
    (3) The project audit report should cover the borrower entity and 
the expense for preparation of the audit report may include the 
auditor's preparation of any Internal Revenue Service (IRS) required 
borrower entity reports, i.e., Schedule K1 (IRS Form 1065), ``Partner's 
Share of Income, Credits, Deductions, etc.''.
    (4) The CPA or LPA auditor who prepares the audit report may not be 
an individual or organization that is associated with the borrower in 
any manner, other than the performance of the audit review and 
preparation of the project audit report and required IRS reports, that 
creates an identity of interest or possible conflict of interest (as 
described in paragraph V B of exhibit B of this subpart). For example, 
the CPA or LPA auditor may not be an employee of the borrower or an 
employee of any officer of the organization, nor be an employee of any 
member, stockholder, partner, principal, or have any ownership or other 
interest in the borrower organization.
    (5) The State Director or Servicing Official may authorize the 
initial audit report to cover a period up to 18 months for new projects 
whose first operating year does not exceed 6 months.
    (6) The State Director may also make an exception to the CPA or LPA 
audit requirement for not more than one successive year in a specific 
case providing: The borrower submits a written request; the FmHA or its 
successor agency under Public Law 103-354 approved budget for the 
project includes a typical and reasonable fee for the audit but the 
negotiated cost of an audit would increase the monthly per unit rental 
rate by more than $4.00; and the required reports, including a CPA or 
LPA prepared audit, were properly submitted for the prior year's project 
operations.
    (B) Verification of review. Form FmHA or its successor agency under 
Public Law 103-354 1930-8 will be prepared by a competent person 
qualified by education and/or experience who has no identity of interest 
or possible conflict of interest with the borrower or its principals. 
However, in the case of a nonprofit institution, the verification of 
review may be made by a committee of the membership but may not include 
any officer, director or employee of the borrower.
    (1) Form FmHA or its successor agency under Public Law 103-354 1930-
8 will be used for the verification of review of project accounts and 
the review verifier will also review the actual data on Form FmHA or its 
successor agency under Public Law 103-354 1930-7 for projects with 24 or 
fewer units unless the requirements of paragraph (b)(4)(i)(A)(1) of this 
section are invoked by the State Director or Servicing Official.
    (2) The State Director or Servicing Official may authorize the 
initial verification of review to cover a period of up to 18 months for 
a new project whose first operating year was less than 6 months.
    (C) Project operating budget actuals. An annual report of actuals 
for the full operating year will be submitted by the borrower, or its 
agent, using Form FmHA or its successor agency under Public Law 103-354 
1930-7. The report will reflect the actual income and expenses for the 
project for the borrower's 12 month operating year. The report will be 
submitted with the annual audit report or Form FmHA or its successor 
agency under Public Law 103-354 1930-8, as appropriate.
    (D) Form FmHA or its successor agency under Public Law 103-354 1930-
10, ``Annual Multiple Family Housing Project Review.'' When the annual 
audit report or verification of review is received by the Servicing 
Office, parts II C and D of Form FmHA or its successor agency under 
Public Law 103-354 1930-10 may be prefilled to the extent possible to 
record previous year status as reported in the audit report or 
verification of review. The Form FmHA or its successor agency under 
Public Law 103-354 1930-10 will be completed later as described in 
Sec. 1930.123 (e)(2) and (i) of this subpart.
    (E) Fraud, abuse, and illegal acts. If the review verifier becomes 
aware of any indication of fraud, abuse or illegal acts in FmHA or its 
successor agency

[[Page 209]]

under Public Law 103-354 financed projects, prompt written notice shall 
be given to the appropriate USDA OIG Regional Inspector General and the 
Servicing Official.
    (ii) Specific standards--(A) State and local governments and Indian 
tribes. These organizations are to be audited in accordance with this 
subpart, subpart I of 7 CFR part 3015, and OMB Circular A-128, with 
copies of the audit being forwarded by the borrower to the Servicing 
Official and the appropriate Federal cognizant agency, if applicable. 
For guidance in meeting these requirements, the auditor may refer to the 
American Institute of Certified Public Accountants Audit and Accounting 
Guide for ``Audits of State and Local Governmental Units.'' The term 
``Federal financial assistance'' used herein shall mean Federal loan 
and/or grant funds received by the borrower, but not rental subsidies.
    (1) Cognizant agency. (i) ``Cognizant agency'' means the Federal 
agency assigned by OMB Circular A-128. Within USDA, the USDA OIG shall 
fulfill cognizant agency responsibilities.
    (ii) Cognizant agency assignments. Smaller borrowers not assigned a 
cognizant agency by OMB should contact the Federal agency that provided 
the most funds. When USDA is designated as the cognizant agency or when 
it has been determined by the borrower that FmHA or its successor agency 
under Public Law 103-354 provided the major portion of Federal financial 
assistance, the appropriate USDA OIG Regional Inspector General shall be 
contacted.
    (2) Audit standards. It is not intended that audits required by this 
subpart be separate and apart from audits performed in accordance with 
State and local laws. To the extent feasible, the audit work should be 
done in conjunction with those audits.
    (i) State and local governments and Indian tribes that receive 
$100,000 or more a year in Federal financial assistance shall have an 
audit made in accordance with OMB Circular A-128.
    (ii) State and local governments and Indian tribes that receive 
between $25,000 and $100,000 a year in Federal financial assistance 
shall have an audit made in accordance with OMB Circular A-128 or in 
accordance with the FmHA or its successor agency under Public Law 103-
354 Audit Program. This is an option of the State and local government 
or Indian tribe. If the election is made to have an audit performed in 
accordance with the FmHA or its successor agency under Public Law 103-
354 Audit Program, the audit shall be in accordance with paragraph 
(b)(4)(ii)(C) of this section.
    (iii) State and local governments and Indian tribes that receive 
less than $25,000 a year in Federal financial assistance shall be exempt 
from compliance with OMB Circular A-128 and the FmHA or its successor 
agency under Public Law 103-354 Audit Program. These State and local 
governments and Indian tribes shall be governed by audit standards 
prescribed by State and local law or regulation.
    (iv) Public hospitals and public colleges and universities may be 
excluded from OMB Circular A-128 audit standards. If such entities are 
excluded, audits shall be made in accordance with paragraph 
(b)(4)(ii)(B) of this section.
    (v) Indications of fraud, abuse, and illegal acts shall be processed 
in accordance with paragraph (b)(4)(i)(E) of this section.
    (B) Nonprofit institutions. These organizations are to be audited in 
accordance with this subpart, subpart I of 7 CFR part 3015, and OMB 
Circular A-133, with copies of the audit being forwarded by the borrower 
to the Servicing Officer and the appropriate Federal cognizant agency, 
if applicable. The term Federal financial assistance used herein shall 
mean Federal loan and/or grant funds received by the borrower, but not 
rental subsidies.
    (1) Cognizant agency. See paragraph (b)(4)(ii)(A)(1) of this 
section.
    (2) Audit standards. (i) Nonprofit institutions that receive 
$100,000 or more a year in Federal financial assistance shall have an 
audit made in accordance with the provisions of OMB Circular A-133. 
However, nonprofit institutions receiving $100,000 or more but receiving 
awards under only one program have the option of having an audit of 
their institution prepared in accordance with the provisions of the 
Circular or having an audit made of the one program in accordance with 
paragraph (b)(4)(ii)(C) of this section. For prior or

[[Page 210]]

subsequent years, when an institution has only loan guarantees or 
outstanding loans that were made previously, the institution will be 
required to conduct audits for those programs in accordance with 
paragraph (b)(4)(ii)(C) of this section.
    (ii) Nonprofit institutions that receive at least $25,000 but less 
than $100,000 a year in Federal financial assistance shall have an audit 
made in accordance with OMB Circular A-133 or in accordance with the 
FmHA or its successor agency under Public Law 103-354 Audit Program. If 
the election is made to have an audit performed in accordance with the 
FmHA or its successor agency under Public Law 103-354 Audit Program, the 
audit shall be performed in accordance with paragraph (b)(4)(ii)(C) of 
this section.
    (iii) Nonprofit institutions receiving less than $25,000 a year in 
Federal financial assistance are exempt from Federal audit standards, 
but records must be available for review by appropriate officials of 
FmHA or its successor agency under Public Law 103-354.
    (3) Indications of fraud, abuse and illegal acts shall be processed 
in accordance with paragraph (b)(4)(i)(E) of this section.
    (C) FmHA or its successor agency under Public Law 103-354 Audit 
Program. For-profit organizations and other entities referred to this 
paragraph by paragraphs (b)(4)(ii)(A) and/or (B) of this section, audits 
will be performed under the guidance of the audit guide entitled ``U.S. 
Department of Agriculture, Farmers Home Administration or its successor 
agency under Public Law 103-354-Audit Program'' (available in any FmHA 
or its successor agency under Public Law 103-354 office).
    (iii) Due date. (A) Annual audit reports and verifications of 
review, as appropriate, and Form FmHA or its successor agency under 
Public Law 103-354 1930-7 with 12 months of project operation actuals 
are due in the Servicing Office no later than 90 days following the 
close of the project fiscal year.
    (B) If the audit or verification of review cannot be submitted by 
the due date, and the owner presents a request for extension supported 
by evidence that delay is at the request of the auditor, and the request 
has a reasonable explanation of why an extension of the due date is 
needed, the Servicing Officer may authorize up to a 30-day extension of 
the due date.
    (C) If an explanation is not forthcoming from the auditor, or the 
explanation received is without good reason, or the Servicing Official 
otherwise suspects fiscal difficulty, the Servicing Official may request 
the borrower to submit to the Servicing Office for review, the project 
bank statements for the general operating, reserve, and investment 
accounts covering the most recent 60 day period.
    (D) If the borrower fails to submit the requested bank statements by 
the date stipulated by the Servicing Official, the Servicing Official 
will immediately refer the matter to the OIG.
    (iv) FmHA or its successor agency under Public Law 103-354 review. 
An audit report or verification of review will be reviewed by the 
Servicing Official within 60 days following receipt of the audit report 
or verification of review. From this annual audit review process, the 
Servicing Official will initiate action on findings and concerns needing 
immediate attention. Those findings and concerns not needing immediate 
action will be considered in the next budget planning and annual review 
process at the end of the fiscal year for implementation in the 
following fiscal year of project operation.
    (5) Miscellaneous management reports. These reports include, but are 
not limited to, the following items that provide additional or unique 
information that augment or otherwise support other management reports 
described in this section:
    (i) Documents and formats--(A) Minutes of annual meetings. Written 
record of annual meeting of organizational borrowers who, by their 
organizational charter, are required to maintain such written records.
    (B) Energy audit. Prepared according to the guidance of exhibit D of 
this subpart. Energy audits, including implementation plans for energy 
conservation, are prepared and submitted on 5-year cycles.
    (C) Miscellaneous items. These include other written or 
electronically stored data or information such as financial

[[Page 211]]

or income/expense data, justification statements, or other technical or 
informative material that stands alone or supports other managements 
reports described in this section, whether volunteered by the borrower 
or requested by the Servicing Official.
    (ii) Due date. Annual minutes and miscellaneous items are due along 
with the report they are attached to as supporting documentation. New 
energy audits are due with the next submission of Form FmHA or its 
successor agency under Public Law 103-354 1930-7 following expiration of 
the old energy audit.
    (iii) FmHA or its successor agency under Public Law 103-354 review. 
FmHA or its successor agency under Public Law 103-354 review of 
miscellaneous management reports will coincide with review of the 
management report that each is attached to as documentation.

[58 FR 40868, July 30, 1993, as amended at 63 FR 2135, Jan. 14, 1998]



Sec. 1930.123  Annual review.

    (a) Objective. The objective of the annual review is for the FmHA or 
its successor agency under Public Law 103-354 Servicing Official to 
determine the degree and adequacy of the borrower's achievement of 
operational compliance with the applicable FmHA or its successor agency 
under Public Law 103-354 loan and/or grant agreements and to provide 
followup consultation or supervision to the borrower in meeting program 
objectives.
    (b) Annual review process. During the annual review process, the 
Servicing Official will consider the overall project financial and 
operational activity. Project strengths and weaknesses will be 
identified, based on review of various documents, and resultant 
conclusions will be incorporated into the annual budget planning process 
that should happen concurrently with the annual review process.
    (c) Documents used in the review. (1) Form FmHA or its successor 
agency under Public Law 103-354 1930-7.
    (2) Exhibit A-6 of subpart E of part 1944 of this chapter.
    (3) Prior fiscal year annual audit report as prepared by a CPA or 
LPA, or when applicable, Form FmHA or its successor agency under Public 
Law 103-354 1930-8 prepared by a review verifier accompanied by Form 
FmHA or its successor agency under Public Law 103-354 1930-7 with actual 
income and expense data.
    (4) Exhibit A-1 of this subpart prepared in conjunction with the 
prior year annual audit report.
    (5) Applicable attachments required as part of any of the above 
documents (or other information as volunteered by the borrower or 
specifically requested by the FmHA or its successor agency under Public 
Law 103-354 Servicing Officer for the review at hand).
    (6) Minutes of annual meeting for association type borrowers.
    (7) Current energy audit with energy conservation implementation 
plan (from FmHA or its successor agency under Public Law 103-354 
borrower casefile except when new energy audit is due with Form FmHA or 
its successor agency under Public Law 103-354 1930-7).
    (8) Latest supervisory visit and physical inspection of property 
reports (from FmHA or its successor agency under Public Law 103-354 
borrower casefile).
    (d) Preparation for the annual review. Some documents needed are 
available in the borrower's casefile and the balance needed will be 
submitted with the annual budget review request. Therefore, annual 
review should occur within 30 days of receipt of all necessary 
documents. This should result in annual reviews being completed in the 
last 2 months of a fiscal year or the first 2 months of the next fiscal 
year. When determined necessary, the Servicing Officer should:
    (1) Notify the borrower of the required management reports and their 
due dates, and provide the borrower with necessary guides and forms for 
use in preparing the reports.
    (2) With a new nonprofit borrower organization, determine that the 
borrower is properly planning for its annual meeting for the correct 
date according to its organizational documents. The Servicing Official 
should plan to attend the annual meeting unless the borrower has 
progressed as described in Sec. 1930.110(c) of this subpart.

[[Page 212]]

    (e) Timing, conducting, and completing the review. (1) The annual 
review process will be scheduled and performed concurrently with the 
budget planning process, normally in the last quarter of a project 
fiscal year (see illustration in paragraph (i) of this section). This 
process will occur separately from the annual audit review process 
(which will occur following close of a project fiscal year).
    (2) The Servicing Official will use the applicable resource 
documents listed above when performing the review. The Servicing 
Official will conduct the annual review following the review and 
recording guidance of Form FmHA or its successor agency under Public Law 
103-354 1930-10. The Form FmHA or its successor agency under Public Law 
103-354 1930-10 will be completed during the prescribed last quarter 
review period.
    (3) The Servicing Official may invite the borrower or its agent to 
participate in any part of the annual review.
    (f) Distribution of reviewed documents. (1) A copy of the results of 
the annual review on Form FmHA or its successor agency under Public Law 
103-354 1930-10 along with recommendations or compliance requirements 
will be sent to the borrower and/or its agent and to the State Director 
as soon as the review is completed.
    (2) The individual items required to perform the annual review will 
be distributed according to appropriate FMI's as listed on exhibit B-7 
of this subpart.
    (g) State Director's review of annual reviews. Upon receipt of the 
items identified in this section, the State Director will:
    (1) Review all submissions of Form FmHA or its successor agency 
under Public Law 103-354 1930-10 that are used by the Servicing Official 
to record summary results of an annual project review.
    (2) Conduct a more detailed review of only those annual reviews that 
warrant further review. The State Director should provide summarized 
comment to Servicing Officials after completion of statewide review, 
otherwise the State Director will comment on any specific borrower and/
or project annual review selected for further review.
    (3) Will review Form 1930-7 and exhibit A-6 of subpart E of part 
1944 for approval when the authority to approve budgets as part of the 
annual review is not delegated to the FmHA or its successor agency under 
Public Law 103-354 Servicing Official.
    (4) Be prepared for a sample review of annual reviews by the 
National Office upon request during a combined assessment review or 
other specific need.
    (h) On-farm LH annual review. For individual farm borrowers with on-
farm LH unit(s), the objective of this section will be satisfied by 
completing the recordkeeping and reporting requirements of their farm 
and home planning with FmHA or its successor agency under Public Law 
103-354 as outlined in subpart D of part 1944 of this chapter.
    (i) Illustration of MFH budget planning, annual review, and annual 
audit review cycles.

----------------------------------------------------------------------------------------------------------------
                                    Last quarter of    First quarter of
Items on hand during fiscal year      fiscal year      next fiscal year     Second quarter
----------------------------------------------------------------------------------------------------------------
Management Reports/items in       Budget Planning     Annual audit        FmHA or its         File annual audit
 borrower casefile.                Process--Form       preparation by      successor agency    or Form FmHA or
--Previous fiscal year annual      FmHA or its         auditor or Form     under Public Law    its successor
 audit or Form FmHA or its         successor agency    FmHA or its         103-354 review of   agency under
 successor agency under Public     under Public Law    successor agency    annual audit or     Public Law 103-
 Law 103-354 1930-8.               103-354 1930-7 &    under Public Law    Form FmHA or its    354 1930-8 for
                                   util. allowance     103-354 1930-8 by   successor agency    next budget
                                   Review change or    verifier.           under Public Law    planning & annual
                                   no change of                            103-354 1930-8.     review process.
                                   rents or                               60-day review
                                   occupancy charges                       period.
                                   and/or utility
                                   allowance.
--Exhibit A-1
--Latest supervisory visit/       FmHA or its         Form FmHA or its    FmHA or its         ..................
 inspection.                       successor agency    successor agency    successor agency
                                   under Public Law    under Public Law    under Public Law
                                   103-354 starts      103-354 1930-7      103-354 completes
                                   annual review       showing 12 months   annual review
                                   process.            of project          process.
                                                       operating actuals
                                                       submitted by
                                                       borrower.

[[Page 213]]

 
--Energy audit & implementation   --Form FmHA or its  ..................  ..................  ..................
 plan.                             successor agency
                                   under Public Law
                                   103-354 1930-7
--Compliance review.............  --Review project    ..................  FmHA or its         ..................
--Management Plan...............   financial and                           successor agency
--Management Agreement..........   management                              under Public Law
                                   reports.                                103-354 may pre-
                                                                           fill parts II C
                                                                           and D of Form
                                                                           FmHA or its
                                                                           successor agency
                                                                           under Public Law
                                                                           103-354 1930-10.
--Forms FmHA or its successor     FmHA or its         ..................  Take immediate      ..................
 agency under Public Law 103-354   successor agency                        action on
 1944-30, Identity of Interest     under Public Law                        significant items
 (IOI) Disclosure Certificate,     103-354 completes                       found in the
 and FmHA or its successor         Form FmHA or its                        Audit Review.
 agency under Public Law 103-354   successor agency
 1944-31, Identity of Interest     under Public Law
 (IOI) Qualification Form.         103-354 1930-10.
Other--as applicable.
----------------------------------------------------------------------------------------------------------------


[58 FR 40868, July 30, 1993, as amended at 59 FR 6885, Feb. 14, 1994]



Sec. 1930.124  [Reserved]



Sec. 1930.125  Changing project designation.

    Generally, RRH projects designated for families, elderly and persons 
with handicaps, including congregate housing, will be used for the 
original purpose throughout the life of the FmHA or its successor agency 
under Public Law 103-354 loan. However, if it becomes necessary to 
change the designation of a project due to housing market changes which 
inhibit the borrower's ability to maintain occupancy levels sufficient 
to sustain the project, the State Director may change the designation. 
Project design must meet the housing requirements of the target group 
when changing the designation. The State Director shall consider such 
requests on a case-by-case basis when all of the following information 
has been provided:
    (a) The complete borrower case files have been submitted together 
with the Servicing Official's specific recommendations and analysis of 
the present and long term situation.
    (b) A market needs survey which substantiates the rationale for the 
change has been provided by the borrower. (The market survey must 
clearly indicate the present long term marketability of the project is 
significantly changed from the original market, and include the 
appropriate demographic information which reflects the population trends 
in the area.)
    (c) A summary of all servicing actions taken by FmHA or its 
successor agency under Public Law 103-354 to aid the borrower in 
maintaining the present designation.
    (d) A summary of all actions taken by the borrower to effectively 
market the units to potential eligible tenants.
    (e) A summary of the impact the change will have on any existing 
tenants, rent subsidy needs, and the community as a whole.
    (f) A summary of any needed or required physical modifications and 
analysis of cost feasibility to complete the modifications.



Secs. 1930.126-1930.127  [Reserved]



Sec. 1930.128  LH grants.

    In addition to the supervision provided in connection with LH loans, 
recipients of LH grants will receive supervision to assure that the 
terms of the grant agreement and other objectives of the LH grant are 
carried out.

[[Page 214]]

This supervision will be continued to assure that the grant purposes 
will be accomplished. Comments on the following points will be included 
in appropriate reports, to assure that:
    (a) The rents are reasonable.
    (b) The project is operated as a community service for the benefit 
of the tenants.
    (c) Domestic farm laborers are given absolute priority in occupancy. 
(This requirement also applies to borrowers who have LH loans only.)
    (d) No public or private nonprofit organization borrower may require 
that an occupant work for a particular farm or for a particular owner or 
interest as a condition of occupancy of the housing.



Sec. 1930.129  RHS loans.

    RHS loans will be serviced according to program regulations and the 
conditions specified in the borrower's loan resolution. The following 
additional supervisory action by the Servicing Official will also apply 
to assure that the terms of the loan resolution and loan objectives are 
carried out:
    (a) Review of the site development account records for compliance 
with authorized loan expenditures.
    (b) Work with the borrower on the adjustment of sales price, not to 
exceed market value, of the developed lots as they are being sold to 
assure adequate income to repay the loan, pay taxes, accrued interest, 
and any other authorized debt or expenditures.
    (c) Determine that lots are sold only to eligible buyers.
    (d) Work closely with the borrower to plan for the sale of all lots 
prior to the due date of the note.
    (e) Should the RHS borrower default in its loan obligations, the 
account will be serviced according to Sec. 1965.85 of subpart B of part 
1965 of this chapter. The Servicing Official's report to the State 
Director should contain the following information:
    (1) The status of the account, number of lots unsold, and reasons 
for the problem.
    (2) Prospects of selling lots to eligible buyers and a target date 
as to when this can be accomplished, if feasible.
    (3) General comments and recommendations for future servicing of 
this account. Where necessary, liquidation may be recommended.
    (f) State Directors will take the following actions in connection 
with problem RHS accounts:
    (1) Provide additional guidance and assistance as necessary.
    (2) If a satisfactory proposal for selling the lots can be 
developed, the account will be serviced according to program regulations 
and the provisions of this subpart and subpart B of part 1965 of this 
chapter.
    (3) Where no satisfactory proposal for selling the remaining lots 
can be developed, the account will be handled according to 
Sec. 1965.85(e) of subpart B of part 1965 of this chapter for 
liquidation.



Secs. 1930.130-1930.133  [Reserved]



Sec. 1930.134  FmHA or its successor agency under Public Law 103-354 office records.

    FmHA or its successor agency under Public Law 103-354 officials will 
maintain records in accordance with FmHA or its successor agency under 
Public Law 103-354 Instructions 2033-A and G (available in any FmHA or 
its successor agency under Public Law 103-354 office).



Secs. 1930.135-1930.136  [Reserved]



Sec. 1930.137  State Supplements, guides, forms, and other issuances.

    It is FmHA or its successor agency under Public Law 103-354's 
practice to follow the provisions of the Administrative Procedures Act 
by inviting public comment before adopting public policy, unless 
otherwise directed by statute. However, the State Director may, in 
accordance with FmHA or its successor agency under Public Law 103-354 
Instruction 2006-B (available in any FmHA or its successor agency under 
Public Law 103-354 office), and with prior approval of the National 
Office and the assistance of the OGC, develop State Supplements, guides, 
or issuances to the extent necessary to enable borrowers to comply with 
the policies, procedures, and exhibits of

[[Page 215]]

this subpart and the applicable provisions of State laws. Under no 
circumstances will State forms be developed as replacements for the 
forms referred to in this subpart.



Sec. 1930.138  Supervisory actions for distressed projects.

    MFH projects experiencing high vacancy rates which would lead to 
project failure can apply for a special servicing market rate rent 
change in accordance with paragraph IX of exhibit C of this subpart.



Secs. 1930.139-1930.140  [Reserved]



Sec. 1930.141  Materials to be provided borrower/applicant.

    To enable borrowers and applicants to meet the intent of this 
subpart, they will be supplied with one reproducible copy of the 
following FmHA or its successor agency under Public Law 103-354 exhibits 
and forms and materials as they are issued and/or updated:
    (a) Exhibits B and B-1 thru 14 of this subpart, when applicable.
    (b) Exhibits C, C-1, and C-2 of this subpart.
    (c) Exhibits D and D-1 of this subpart.
    (d) Exhibit E of this subpart.
    (e) Exhibits H and H-1 of this subpart.
    (f) Exhibit I of this subpart.
    (g) Exhibit J of this subpart, when applicable.
    (h) Subpart L of part 1944 of this chapter.
    (i) Booklet entitled ``Audit Program.''
    (j) For farm LH borrowers and/or applicants, exhibit B of subpart D 
of part 1944 of this chapter in addition to the preceding items of this 
section.
    (k) The following forms:
    (1) Form FmHA or its successor agency under Public Law 103-354 1930-
7 and attached exhibit A-6 of subpart E of part 1944, if applicable.
    (2) Form FmHA or its successor agency under Public Law 103-354 1930-
8.
    (3) Form FmHA or its successor agency under Public Law 103-354 1944-
7, ``Multiple Family Housing Interest Credit and Rental Assistance 
Agreement.''
    (4) Form FmHA or its successor agency under Public Law 103-354 1944-
29, ``Project Worksheet for Interest Credit and Rental Assistance.''
    (5) Form FmHA or its successor agency under Public Law 103-354 1944-
8.
    (6) Form FmHA or its successor agency under Public Law 103-354 1910-
5, ``Request for Verification of Employment.''



Sec. 1930.142  Complaints regarding discrimination in use and occupancy of MFH.

    Any tenant or prospective tenant seeking occupancy or use of RRH, 
RCH, LH, or related facilities who believes he or she has been 
discriminated against because of race, color, religion, sex, national 
origin, age, familial status, or handicap may file a complaint in person 
with, or by mail to the Office of Fair Housing and Equal Opportunity, 
Department of Housing and Urban Development (HUD), Washington, DC 20410, 
or any HUD office, or to the Administrator, FmHA or its successor agency 
under Public Law 103-354, USDA, Washington, DC 20250. If the complaint 
is made to an FmHA or its successor agency under Public Law 103-354 
County, Servicing, or State Office, it must be directed to the Director 
of Equal Opportunity Staff (EOS), National Office by the FmHA or its 
successor agency under Public Law 103-354 employee in charge of that 
office. When a complaint is sent to FmHA or its successor agency under 
Public Law 103-354-EOS by a FmHA or its successor agency under Public 
Law 103-354 Servicing Office, the State Director will be made aware of 
the complaint.
    (a) Personnel in FmHA or its successor agency under Public Law 103-
354 field offices will provide assistance to the aggrieved party when 
filling out required forms and filing a complaint.
    (b) Each complaint must contain the following information:
    (1) The name and address of the respondent (complainant).
    (2) The name and address of the aggrieved person.
    (3) A description and the address of the dwelling which is involved, 
if appropriate.
    (4) A concise statement of the facts, including pertinent dates, 
constituting the alleged discriminatory housing practice.

[[Page 216]]

    (c) Participants in FmHA or its successor agency under Public Law 
103-354's housing program failing to comply with the requirements of 
Title VIII of the Civil Rights Act of 1968 as amended by the Fair 
Housing Amendments Act of 1988, and the respective Affirmative Fair 
Housing Marketing Plan will make themselves liable to sanction 
authorized by law, regulations, agreements, rules and/or policies 
governing the program pursuant to which the application was made. All 
complaints will be handled in accordance with prescribed procedure. 
Victims of alleged discriminatory housing practices may seek reparations 
through HUD or by private lawsuit.



Sec. 1930.143  Delegation of responsibility and authority.

    (a) The Administrator may on an individual state basis, authorize 
the State Director to contract out selective fact gathering, nondecision 
making servicing actions in this subpart.
    (b) The State Director may delegate in writing any authority 
delegated to the State Director in this subpart unless otherwise 
restricted, to those State staff members who, in the opinion of the 
State Director, have been adequately trained and who demonstrate their 
knowledge in understanding and administering the MFH policies and 
procedures of FmHA or its successor agency under Public Law 103-354. The 
State Director may further delegate such authority in like manner to 
Servicing Offices by either of two options:
    (1) To individual Servicing Office staff members, including the 
Servicing Official.
    (2) To the position of Servicing Official, the incumbent of which 
may further delegate specified authority to identified Servicing Office 
staff members. A copy of such delegation will be filed with the State 
Director.
    (c) Individual delegation of responsibility and authority may be 
limited or expanded in scope, or revoked, as deemed appropriate by the 
State Director, or the Servicing Official when applicable, and will be 
prepared according to FmHA or its successor agency under Public Law 103-
354 Instruction 2006-F (available in any FmHA or its successor agency 
under Public Law 103-354 office).



Sec. 1930.144  Exception authority.

    The Administrator may, in individual cases, make an exception to any 
requirements of this subpart not required by the authorizing statute if 
he/she finds that application of such requirement would adversely affect 
the interest of the Government or adversely affect the accomplishment of 
the purposes of the MFH program or result in undue hardship by applying 
the requirement. The Administrator may exercise the authority at the 
request of the State Director or the Assistant Administrator for 
Housing. The request must be supported by data that demonstrates the 
adverse impact, citing the particular requirement involved and 
recommending proper alternative course(s) of action, and outlining how 
the adverse impact could be mitigated.



Sec. 1930.145  Appeals.

    Only the borrower, or the borrower's representative (as defined in 
subpart B of part 1900 of this chapter), can appeal an FmHA or its 
successor agency under Public Law 103-354 decision. The borrower's 
management agent may not request an appeal unless he/she has been 
designated as the borrower's representative. This means he/she must be 
authorized in writing by the borrower to act for the borrower in the 
administrative appeal, as required by subpart B of part 1900 of this 
chapter (this may be addressed in the management agreement). The 
borrower's request for review of an alleged adverse decision must be 
made to FmHA or its successor agency under Public Law 103-354 in written 
form. Appeals and reviews will be handled in accordance with directions 
set forth in subpart B of part 1900 of this chapter.



Secs. 1930.146-1930.149  [Reserved]



Sec. 1930.150  OMB control number.

    The reporting and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget and 
have been assigned OMB control number

[[Page 217]]

0575-0033. Public reporting and recordkeeping burden for this collection 
of information is estimated to vary from 5 minutes to 10.25 hours per 
response, with an average of 0.43 hours per response, including time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the collection 
of information. Send comments regarding this burden estimate or any 
other aspect of this collection of information, including suggestions 
for reducing this burden, to the Department of Agriculture, Clearance 
Officer, OIRM, room 404-W, Washington, DC 20250; and to the Office of 
Management and Budget, Paperwork Reduction Project (OMB 0575-
0033), Washington, DC 20503.

      Exhibit A to Subpart C of Part 1930--Steps for Farmers Home 
 Administration (FmHA) or Its Successor Agency Under Public Law 103-354 
  Personnel in Conducting Annual Review of Multiple Housing Operations

    I.  Examine the Condition of the Borrower/Management Reports to 
Determine that:
    A.  Required accounts are being properly maintained in accordance 
with the loan resolution or agreement.
    B.  Decisions of officials are being entered in the minutes book, if 
applicable.
    C.  Any membership or stock transfers have been approved by FmHA or 
its successor agency under Public Law 103-354 and recorded as required.
    D.  Financial records are maintained by qualified persons.
    E.  The financial records are being reviewed by a qualified auditor 
where an audit is required or by a competent individual or committee 
when a verification of review of accounts is required.
    II.  Study the Financial Progress: Compare current financial 
condition and owner's equity with previous years to discover any trends, 
for example:
    A.  Has cash carryover increased or decreased?
    B.  Are the debts greater or less?
    C.  Is the owner's equity greater or less?
    D.  Are accounts receivable greater or less?
    E.  Are collection provisions being enforced?
    F.  Are reserve and other required funds or accounts properly 
maintained?
    III.  Study the State of Income and Expenditures for the Past Year: 
Compare it with the budget for the past year and the same statement for 
previous years.
    A.  Were rents or occupancy charges, subsidies, and other monies 
collected sufficient to produce the required revenues for planned 
expenditures?
    B.  Were actual expenditures significantly different from those 
budgeted?
    C.  Were the expenditures sufficient to adequately maintain the 
project?
    D.  Were expenditures reasonable and typical for similar projects?
    E.  Were any essential items of maintenance deferred during the past 
year?
    F.  Were payments made on authorized debts in the proper amounts and 
on the dates agreed to?
    G.  If the borrower is operating on a limited profit basis, did net 
cash return exceed the amount permitted in the loan agreement or loan 
resolution?
    H.  Did the borrower charge late fees to project accounts other than 
the Return on Investment Account?
    I.  Were an excessive number of overage charges paid by the project?
    IV.  Study the Budget for the next Year: Compare it with the 
statement of income and expenditures for the past year, taking into 
consideration any known increase or decrease in operating expenses for 
the planned year and the prevailing costs of doing similar business in 
the market area.
    A.  Are proposed expenditures adequate for normal maintenance and 
operation of the project?
    B.  Are proposed fees to be paid to firms closely associated with 
the borrower and their management agents typical, reasonable, and earned 
for the services to be provided?
    C.  Does the budget make provision for financing maintenance or 
energy conservation measures/practices deferred from the previous year?
    D.  Does it provide for the required financial reserves?
    E.  Is planned revenue adequate to cover planned expenditures?
    F.  Will the budget and planned operating practices correct any 
deficiencies in the past year's operations?
    V.  Study the Audit Report: Compare it with the audit from the 
previous year, noting any significant changes affecting the borrower's 
operations. Exhibit A-1 of this subpart may be used as a guide.
    VI.  Review the Energy Audit: Review the most recent energy audit 
and the borrower's plan for implementation.
    VII.  Determine Whether or Not the Borrower Has:
    A.  Maintained required financial records and accounts, made 
required reports, submitted required financial audits or verifications 
of review and taken appropriate

[[Page 218]]

action to correct previously noted deficiencies of such records, 
reports, audits or verifications.
    B.  Renewed fidelity coverage and insurance policies.
    C.  For borrowers with governing bodies.
    1.  Held regular board, committee, and membership meetings.
    2.  Conducted the affairs along sound business lines.
    D.  Made a change in any organizational documents without FmHA or 
its successor agency under Public Law 103-354 consent.
    E.  Made a change in the plans for management and operations of the 
project without FmHA or its successor agency under Public Law 103-354 
consent.
    F.  Made a change in the membership or interest in ownership without 
FmHA or its successor agency under Public Law 103-354 consent.
    VIII.  Summary: Summarize major observations and decisions reached 
as the result of the review and record on Form FmHA or its successor 
agency under Public Law 103-354 1930-10, ``Annual Multiple Family 
Housing Project Review.''

    Exhibit A-1 to Subpart C of Part 1930--Audit Report Review Guide

    I  Purpose. To present a general guide for use of Farmers Home 
Administration (FmHA) or its successor agency under Public Law 103-354 
staffs in the review of independent accountants' audit reports in order 
to obtain maximum benefit from these audits. The procedures are designed 
to provide uniformity in the audit review, improve loan program 
servicing, and help to promote better independent audits.
    II  General. FmHA or its successor agency under Public Law 103-354 
guidelines for independent auditors are detailed in the booklet, ``U.S. 
Department of Agriculture, Farmers Home Administration or its successor 
agency under Public Law 103-354--Audit Program'' (hereinafter called 
Audit Program and available in any FmHA or its successor agency under 
Public Law 103-354 office). This Audit Program, along with other 
instructions, is designed to protect the security of Government loans. 
The review of the financial and financially related information in the 
audits must be performed from a technical standpoint in a prompt manner 
so that the facts and conclusions are readily available for analysis; 
only then can results be used effectively for management purposes and 
help to insure improved audit practices.
    III  Scope. The review should include:
    A  A determination of the adequacy of the audit in relation to FmHA 
or its successor agency under Public Law 103-354 regulations and the 
Audit Program.
    B  Interpretation of information included in the audit.
    C  Preparing a letter to the borrower on any missing or adverse 
audit data.
    D  Informing appropriate FmHA or its successor agency under Public 
Law 103-354 offices of review results and recommendations.
    IV  Review Procedures to Be Followed.
    A  General. The individual professional judgment of the reviewer 
should be used at all times. Considerations and decisions requiring the 
exercise of judgment should be used in the following:
    1  Circumstances peculiar to the borrower.
    2  Degree of importance attached to each item questioned.
    3  Number of exceptions.
    4  Whether the exceptions relate to the auditor's work or the 
borrower's records and operations.
    5  If specific action is to be requested of the borrower.
    6  Whether or not the report, as a whole, is acceptable.
    B  Review and Procedure.
    1  Specific.
    a  Determine if the audit was performed by a Certified Public 
Accountant (CPA) or a Licensed Public Accountant (LPA) who was licensed 
on or before December 31, 1970.
    b  Determine if the audit was conducted in accordance with 
Government Auditing Standards (1988 Revision), often referred to as 
generally accepted government auditing standards (GAGAS).
    c  Does the audit cover the most recent 12 months since the previous 
audit?
    d  Was the audit received within 90 days after the borrower's year 
end, or was an extension of up to an additional 30 days authorized by 
the Servicing Official, and if so, was it met?
    2  Evaluation checklist for audit reports. The ``Evaluation 
Checklist for Audit Reports'' which is attachment 1 of this exhibit is 
designed to systematically record and reveal the audit findings. 
Information tallied on this form is a good indication of whether or not 
additional contact(s) need to be made with the borrower.
    3  Previous audits and correspondence. Reference to the prior audit 
and any correspondence concerning it can be most helpful in the current 
review. Determine whether corrections requested in the previous year 
have been made, and whether the borrower has complied with previous 
suggestions for improvement in the audit report.
    C  Preparing the audit review letter. After completion of the 
``Evaluation Checklist for Audit Reports'' (attachment 1 of this 
exhibit) and applying personal judgment, a decision must be made on 
whether or not to prepare an audit review letter similar to that shown 
as attachment 2 of this exhibit.
    1  If the audit fully complies with the Audit Program and 
instructions, a letter is not necessary.

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    2  If the audit substantially meets the requirements and is lacking 
in only a few points, ask the borrower to have the auditor furnish this 
additional information.
    3  Audits which are unacceptable should be returned to the borrower 
for full compliance, indicating the reasons and a timetable for 
resubmitting.

          Attachment 1--Evaluation Checklist for Audit Reports

________________________________________________________________________
State

________________________________________________________________________
County

________________________________________________________________________
Name of Borrower

________________________________________________________________________
Address

________________________________________________________________________
Case No.

________________________________________________________________________
Name of Auditor

________________________________________________________________________
Project No.

________________________________________________________________________
Date of Audit Report

________________________________________________________________________
Period Covered

------------------------------------------------------------------------
                 Yes/no
------------------------------------------------------------------------
                                         1. Auditor's Opinion. (section
--------                                  G-1*).
--------                                 (a) Unqualified.
--------                                 (b) Qualified.
                                         (c) No Opinion.
                                         2. Financial Statement.
--------                                  (section J-1*).
--------                                 (a) Balance Sheet.
--------                                 (b) Results of Operations.
                                         (c) Statement of Cashflow
--------                                  (Changes in Financial
                                          Position).
--------                                 (d) Statement of Changes in
                                          Retained Earnings.
                                         (e) Notes to the Financial
                                          Statements.
                                         3. Statement on Auditing
                                          Standards. (section J-2*).
--------                                 Audit Report contains a
                                          statement that the audit was
                                          made in accordance with
                                          Generally Accepted Government
                                          Auditing Standards (GAGAS).
                                         4. Report on Compliance.
                                          (section J-3*).
--------                                 The auditor should prepare a
                                          written report on the tests of
                                          compliance with applicable
                                          laws, regulations, loan
                                          covenants and agreement and
                                          grant agreements. List
                                          significant compliance
                                          findings:
                                         --------------------
                                         --------------------
                                         --------------------
                                         5. Report on Internal Controls.
--------                                  (Section J-4*). The auditor's
                                          report should assess the
                                          borrower's control risk
                                          including discussion on the
                                          scope of the auditor's
                                          assessment, significant
                                          internal controls assessed,
                                          and any material weaknesses of
                                          internal control noted. List
                                          significant internal control
                                          findings:
                                         ----------------------
                                         ----------------------
                                         ----------------------
                                         ----------------------
                                         6. Reporting Instances of
--------                                  Indication of Illegal Acts.
                                          (Section J-5*). List any
                                          noted:
                                         ----------------------
                                         ----------------------
                                         7. Uncorrected Prior Audit
--------                                  Findings. (Section J-6*).
                                          List:
                                         ------------------------
                                         ------------------------
                                         8. Was report received within
--------                                  90 days after the end of the
                                          borrower's operating year or
                                          within a 30 day extension?
                                         9. Was audit performed and
--------                                  signed by a CPA or LPA? If by
                                          an LPA, verify that the LPA
                                          was licensed on or before
                                          December 31, 1970.
------------------------------------------------------------------------

    *References to ``Sections'' indicate the appropriate section in the 
FmHA or its successor agency under Public Law 103-354 Audit Program 
booklet.

                Attachment 2--Example Audit Review Letter

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Dear Borrower (or Borrower Representative):
    We have reviewed your audit report for the period ------------ to --
----------, prepared by -------------------- on ------------. This 
review was made in accordance with current Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 regulations and 
the Audit Program entitled ``U.S. Department of Agriculture, Farmers 
Home Administration or its successor agency under Public Law 103-354-
Audit Program.'' Based on this review, your audit:
    1. (  ) Is acceptable. However, the auditor's recommendations 
concerning ------------ should be implemented prior to next year's 
audit.
    2. (  ) Is acceptable but did not include comparative-type financial 
statements as indicated in Section J-1 of the Audit Program. Please 
inform the auditor to prepare such statements next year.
    3. (  ) Is acceptable but was not submitted within 90 days or an 
authorized delay of ------------ days after the end of the borrower's 
fiscal year. Please insure that next year's audit is forwarded before --
----------.
    4. (  ) Substantially meets all the requirements. However, the 
following items were omitted as detailed in the Audit Program, Section 
J, ``Reporting Standards.'' Please have your auditor comment on the 
item(s) circled and forward a copy to us. The circled numbers correspond 
to the 6 items listed in Section J of the August Program.

J-1  J-2  J-3  J-4  J-5  J-6

    5. (  ) Is returned as unacceptable for the following reason(s). 
Please have the auditor prepare your audit in accordance with the Audit 
Program.

[[Page 220]]

    a. [  ] It was prepared without audit.
    b. [  ] The following financial statements were omitted: (Audit 
Program, Section J-1)
    [  ] Balance Sheet.
    [  ] Results of Operations.
    [  ] Statement of Cash Flow.
    [  ] Statement of Changes in Retained Earnings, or
    [  ] Reconciliation of Owner's or Partner's Equity.
    [  ] The auditor's opinion of Compliance. (Audit Program, Section J-
3).
    [  ] The auditor's opinion of internal control. (Audit Program, 
Section J-4).

________________________________________________________________________

Servicing Official
    This letter will be prepared in the Servicing Office. A copy of the 
audit and the approval memorandum will be sent to the State Office.

    Exhibit B to Subpart C of Part 1930--Multiple Housing Management 
                                Handbook

    I  Purpose: This exhibit prescribes the Farmers Home Administration 
(FmHA) or its successor agency under Public Law 103-354 regulations, 
policies, and procedures for management of Rural Rental Housing (RRH), 
Rural Cooperative Housing (RCH), and Labor Housing (LH) projects to be 
used by multiple housing borrowers (owners) and applicants and their 
management agents and site managers. Several exhibits are included to 
provide guidance. These regulations are intended to assist borrowers in 
the successful operation of FmHA or its successor agency under Public 
Law 103-354-financed rental and cooperative projects.
    II  Definitions:
    Adjusted annual income. This is the annual income of the household 
members, who live or propose to live in the unit for the next 12 months. 
(Households with a member permanently confined to a hospital or nursing 
home may choose to either include annual income attributable to such 
person, less deductions for which the person would qualify, or exclude 
the annual income attributable to such person and not take any 
deductions for which the person would qualify.), excluding:
    1  $480 for each member of the family residing in the household 
(other than the tenant, cotenant, member, or comember or spouse of 
either, or foster children) who is under 18 years of age; or who is 18 
years of age or older and is disabled, handicapped or a full-time 
student. The student must carry a subject load considered full-time by 
the educational institution attended. This deduction does not apply to 
an unborn child in the household.
    2  $400 for any elderly family.
    3  In the case of an elderly family, the total of actual medical 
and/or handicap assistance expenses paid in excess of 3 percent of 
annual family income may be deducted. If an elderly family has both 
medical and handicap assistance expense, the 3 percent of annual income 
must first be deducted from handicap assistance and any remainder then 
deducted from medical expenses.
    a  Total medical expense includes medical expenses not covered by 
insurance that the tenant or member anticipates incurring over the 12 
months following the effective date of the certification, using past 
experience as a guide.
    b  Examples of medical expenses are dental expenses, prescription 
and nonprescription medicines, medical insurance premiums including 
medicare, eyeglasses, hearing aids and batteries, medical related travel 
cost, the cost of attendant care including a live-in-resident assistant, 
monthly payments required on accumulated major medical bills including 
that portion of a household member's nursing home care paid from 
household income(s).
    Note: Premiums paid for nursing home insurance are not an allowable 
deduction unless a household member is housed at a nursing home and that 
person's income is included in the household income.)
    c  Handicap assistance includes reasonable attendant care and 
auxiliary apparatus expenses described as follows for each member with 
handicaps of the family to the extent needed to enable any family member 
(including such member with handicaps) to be employed:
    (1) That portion of attendant care attributable to specialized 
medical reasons (the portion attributable to companionship is not 
counted).
    (2) Auxiliary apparatus including but not limited to wheelchairs, 
oxygen equipment, reading devices for the visually impaired, and the 
cost of equipment added to cars and vans to permit their use by the 
handicapped or disabled family member proportionate to the amount of use 
by such persons.
    4  In the case of any nonelderly family, total handicap assistance 
expense in excess of 3 percent of annual family income may be deducted:
    a  For any handicap assistance expense described in paragraph 3 c of 
this definition that is anticipated to occur over the 12 months 
following the effective date of the certification, using past experience 
as a guide, to the extent needed to enable any family member (including 
the handicapped or disabled family member) to be employed.
    b  The amount of deduction may not exceed the LESSER of the amount 
by which total expenses for handicap assistance exceed 3 percent of 
annual family income, or the amount of income received by adult members 
from such employment.
    5  The amounts paid by the family for the care of minors under 13 
years of age may be

[[Page 221]]

deducted only to the extent such expenses are not reimbursed. In the 
case of families assisted by American Indian housing authorities, the 
amount will be the greater of child care expenses; or excessive travel 
expenses, not to exceed $25 per family per week. Deductions for these 
expenses are permitted only when such care is necessary to enable a 
family member to further his or her education or to be gainfully 
employed, including the gainful employment of the disabled or 
handicapped family member. When the deduction is to enable gainful 
employment the amount may not exceed the amount of income received from 
such employment. When the deduction is to facilitate further education, 
the amount must not exceed a sum reasonably expected to cover class time 
and travel time to and from classes. The tenant file must contain 
justifying documentation. (Child support payments made on behalf of a 
minor child who does not reside in the unit may not be deducted as a 
child care expense).
    Adjusted monthly income. This is the amount obtained by dividing the 
adjusted annual income by 12.
    Annual income. Annual income is the anticipated total amount of 
income to be received by all members of the household (even if 
temporarily absent) to be in residence during 12 months following the 
effective date of Form FmHA or its successor agency under Public Law 
103-354 1944-8, ``Tenant Certification.''
    1  Income Included. The following are included when determining 
annual income:
    a  The gross amount (before any deductions) of wages and salaries, 
overtime pay, commissions, fees, tips, and bonuses reasonably expected 
to be received by all members of the household.
    b  The net income reasonably expected to be received from operations 
of a business or profession or from rental of real or personal property. 
Expenditures for business expansion or amortization of indebtedness are 
not considered in the computation of net income. Net losses will be 
computed as zero. Deductions from gross business or rental income to 
arrive at net income may be made in the same manner as outlined in 
Internal Revenue Service (IRS) regulations for the exhaustion, wear and 
tear, and obsolescence of depreciable property used in the trade or 
business of the adult household members under the straight line method 
of depreciation. An itemized schedule must be provided in support of any 
deductions from gross income made under the provisions of this section. 
The schedule should be consistent with the amount of depreciation 
permitted for these items for Federal income tax purposes under the 
straight line method of depreciation.
    c  Interest, dividends, and other received income as defined under 
net family assets in this paragraph. On contracts for sale of real 
estate, deeds of trust, or mortgages held by the applicant, tenant or 
member, only the interest portion of the monthly or annual payments 
received by the applicant, tenant or member is included as income.
    d  The gross amount of periodic payments from Social Security 
(including Social Security payment received by adults on behalf of 
minors or by minors intended for their own support), annuities, 
insurance policies, retirement funds, pensions, disability or death 
benefits (except lump sum settlements), and other similar types of 
periodic receipts.
    e  Payments received in lieu of earnings, such as unemployment and 
disability compensation, worker compensation, and severance pay.
    f  Periodic and determinable allowances, such as alimony and child 
support payments, which the applicant, tenant or member can reasonably 
expect to receive.
    g  Regularly recurring contributions or gifts received from persons 
not residing in the dwelling.
    h  Any amount of education grants or scholarships or Veterans 
Administration benefits expected to be received on behalf of tenant, 
cotenant, member, or comember, applicant, or other adult that exceeds 
attendance expenses for tuition, fees, books, and equipment to include 
materials, supplies, transportation, and miscellaneous personal expenses 
of the student (i.e., that portion of benefits received for ``room and 
board'').
    i  All regular pay, separation pay, special pay (except hazard duty 
pay for persons exposed to hostile fire), and allowances of a member of 
the armed forces who is head of the family or spouse, whether or not 
that family member lives in the unit.
    j  Payment received from an adoption incentive program to compensate 
support of a minor child legally adopted by the tenant household.
    k  Public assistance.
    (1) A public assistance payment that DOES NOT designate an amount 
specifically for rent and utilities shall be counted entirely as income.
    (2) A public assistance payment, when administered ``as-paid'' by 
the public assistance agency, DOES designate a specific amount for rent 
and utilities and may adjust (or ratably reduce) that amount based upon 
what the family is currently paying for those items (only one ratable 
reduction will be permitted). The SUM of the ratably reduced amount for 
rent and utilities and the amount for subsistence and other needs shall 
be counted as income.
    (3) Example: The public agency's published schedule shows a monthly 
maximum of $180 for rent and utilities for a particular size family. The 
public assistance agency has verified that the family will receive $220 
monthly for subsistence and other needs. If

[[Page 222]]

the agency does not apply a ratable reduction, $400 per month ($180 + 
$220) will be included in annual income. If the agency applies a ratable 
reduction (e.g., 20 percent) annual income will be computed as shown 
below:

------------------------------------------------------------------------
       Public assistance (P.A.) rent                   Income
------------------------------------------------------------------------
$180 maximum allowed for housing..........  $220 basic needs
                                            +144 P.A. rent
x.80 P.A. adjustment factor...............  $364 mthly income
$144 monthly P.A. rent....................  x12 months
                                            *$4,368 annual income
------------------------------------------------------------------------
* Shown on line 17 f of part IV of Form FmHA or its successor agency
  under Public Law 103-354 1944-8.

    2  Income Exempted. The following are not included in annual income:
    a  Income of dependent minors (including foster children) under 18 
years of age except as specified under 1d of the definition of annual 
income in this paragraph. (Tenant, cotenant, member or comember, or 
spouse of either may never be considered minors.)
    b  In the case of contracts for sale of real estate, mortgages or 
Deeds of Trust held by the tenant, cotenant, member, or comember, the 
principal portion of the payments received by the tenant, cotenant, 
member, or comember.
    c  The value of the allotment provided to an eligible household 
under the Food Stamp Act of 1977.
    d  Payments received for the care of foster children.
    e  Temporary, nonrecurring, or sporadic income (including gifts).
    f  Lump-sum additions to family assets such as inheritances; capital 
gains; insurance payments included under health, accident, hazard, or 
worker compensation policies, and settlements for personal or property 
losses.
    g  Amounts which are granted specifically for, or in reimbursement 
of, the cost of medical expenses for any household member. Medical 
expenses may include those expenses incurred by disabled or handicapped 
residents so that they may maintain independence in living (e.g., 
attendant care).
    h  Amounts of education scholarships paid directly to the student or 
to the educational institution, and amounts paid by the Government to a 
veteran for use in meeting the attendance costs of tuition, fees, books, 
and equipment to include materials, supplies, transportation, and 
miscellaneous personal expenses of the student. Any amounts of such 
scholarships or veterans payments, which are not used for above purposes 
and are available for subsistence and shelter, are considered to be 
income of tenant, cotenant, member, comember, or applicant.
    i  Student loans.
    j  The special hazard duty pay to a household member serving in the 
Armed Forces away from home, who is exposed to hostile fire.
    k  Payments received pursuant to participation in the following 
programs:
    (1) Programs under the Domestic Volunteer Service Act of 1973 
including, but not limited to, the National Older Americans Volunteer 
Programs of the Federal Action Agency for persons age 60 and over 
including the:
    (i) Retired Senior Volunteer Program.
    (ii) Foster Grandparent Program.
    (iii) Senior Companion Program.
    (iv) Older American Committee Service Program.
    (2) National Volunteer Antipoverty Programs such as Volunteers in 
Service to America, Peace Corps, Service Learning Program and Special 
Volunteer Programs.
    (3) Small Business Administration Programs such as the National 
Volunteer Program to Assist Small Business and Promote Volunteer Service 
to Persons with Business Experience, Service Corps of Retired Executives 
and Active Corps of Executives and,
    (4) Title V--Community Service Employment for Older Americans which 
include:
    (i) Senior Community Service Employment Program
    (ii) National Caucus Center on Black Aged
    (iii) National Urban League
    (iv) Association National Pro Personas Mayors
    (v) National Council on Aging
    (vi) American Association of Retired Persons
    (vii) National Council of Senior Citizens
    (viii) Green Thumb.
    (5) Payments received from a State or local low income energy 
assistance program.
    l  Relocation payments made pursuant to title II of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970.
    m  Payments received under the Alaska Native Claims Settlement Act.
    n  Income derived from certain submarginal land of the United States 
that is held in trust for certain Indian tribes.
    o  Payments or allowances made under the Department of Health and 
Human Services Low-Income Home Energy Assistance Program.
    p  That portion of tenant income paid from the Job Training 
Partnership Act, whether paid directly or through the employer.
    q  Income derived from the disposition of funds of the Grand River 
Bank of Ottawa Indians.
    r  The first $2,000 of per capital shares received from judgment 
funds awarded by the Indian Claims Commission or the Court of Claims, or 
from funds held in trust for an Indian tribe by the Secretary of 
Interior.

[[Page 223]]

    s  Any funds which a Federal statute specifies must not be used as 
the basis for denying or reducing Federal financial assistance or 
benefits to which the recipient would otherwise be entitled. (Note: The 
Department of Housing and Urban Development (HUD) periodically publishes 
a notice in the Federal Register identifying the programs and benefits 
that qualify for this exemption.)
    t  Income of a resident assistant, as defined in this paragraph.
    u  Amounts received under training programs funded by HUD.
    v  Amounts received by a disabled person (including a sight impaired 
person) that are disregarded for a limited time for purposes of 
Supplemental Security Income eligibility, and benefits because they are 
set aside for use under a Plan to Attain Self-Sufficiency.
    w  Amounts received by a participant in other public assisted 
programs which are specifically for or in reimbursement of out-of-pocket 
expenses incurred (special equipment, clothing, transportation, child 
care, etc.) and which are made solely to allow participation in a 
specific program.
    x  Gifts, payments, or credits provided by the borrower for the same 
purposes as interest credit or rental assistance for the benefit of 
residents in accordance with an FmHA or its successor agency under 
Public Law 103-354 approved budget when needed to alleviate or avoid 
financial distress in a project for a temporary specified time period 
identified by FmHA or its successor agency under Public Law 103-354.
    y  Interest accrual to an annuity that cannot be withdrawn due to 
the terms of the annuity or its being under the control of others.
    z  Payments received after January 1, 1989, from the Agent Orange 
Settlement Fund or any other fund established pursuant to the settlement 
in the IN RE Agent Orange product liability litigation, M.D.L. No. 381 
(E.D.N.Y.)
    aa  Payments received under the Maine Indian Claims Settlement Act 
of 1980 (Public Law (Pub. L.) 96-420, 94 Stat 1785).
    bb  Earned Income Tax Credit Refund Payments
    cc Redress payments received by Japanese American internment camp 
survivors.
    dd  Reparations paid by foreign governments arising out of the 
Holocaust.
    ee  Deferred periodic payments received in a lump sum from SSI and 
Social Security.
    Borrowers. ``Borrowers'' means owners who may be individuals, 
partnerships, cooperatives, trusts, public agencies, private or public 
corporations, and other organizations and have received a loan or grant 
from FmHA or its successor agency under Public Law 103-354 for LH, RRH, 
RCH, or Rural Housing Site (RHS) purposes.
    Caretaker. The individual(s) employed by the borrower or the 
management agent to handle normal interior and exterior maintenance and 
upkeep of the project as specified in the management plan.
    Cash value of assets. Current market value less cost to convert 
assets to cash.
    Chore service worker. An individual who provides intermittent 
assistance essential to the well being of household members whose 
services are compensated by a Federal, State, or local assistance 
program. A chore service worker will not be a resident of the household 
living unit.
    Congregate Housing. Residential housing for persons or families who 
are elderly or have handicaps or disabilities, consisting of private 
apartments and central dining facilities in which a number of specific 
pre-established services are provided to tenants (short of those 
services provided by a health care facility that provides health related 
care and services recognized by the medicaid program). Tenants requiring 
additional services not provided by the facility will acquire them or 
provide for them within their own financial, familial, or social 
resources.
    Domestic farm laborers. Persons who receive a substantial portion of 
their income as laborers on farms in the United States, Puerto Rico, or 
the Virgin Islands and either are citizens of the United States, or 
reside in the United States, Puerto Rico, or the Virgin Islands after 
being legally admitted for permanent residence, and may include the 
immediate families of such persons, including retired or disabled 
domestic farm laborers as defined in subpart D of part 1944 of this 
chapter.
    Elderly (senior citizen). A person who is at least 62 years old. The 
term elderly (senior citizen) also means individuals with handicaps or 
disabilities as separately defined in this paragraph, regardless of age.
    Elderly family. A household where the tenant, cotenant, member, or 
comember (individual) is at least 62 years old, disabled or handicapped 
as defined separately in this paragraph. An elderly family may include a 
person(s) younger than 62 years of age who is essential to the care and 
well being of the person who is elderly or has handicaps or 
disabilities. (To receive an elderly family deduction, the person who is 
elderly, or has disabilities or handicaps must be the tenant or cotenant 
or member or comember.)
    Eligibility income. The calculated adjusted annual income which is 
compared to the income limits in exhibit C of subpart A of part 1944 of 
this chapter (available in any FmHA or its successor agency under Public 
Law 103-354 office).
    Familial status. This term means one or more individuals (who have 
not attained the age of 18 years) being domiciled with a parent or 
another person having legal custody of such individual or individuals; 
or the designee of such parent or other person having such custody; with 
the written permission of

[[Page 224]]

such parent or other person. The protection against discrimination 
afforded by familial status shall apply to any person who is pregnant or 
is in the process of securing legal custody of any individual who has 
not attained the age of 18 years.
    Forms Manual Insert (FMI). A type of directive which includes a 
sample of the form and complete instructions for its preparation, use, 
and distribution.
    Group home. Housing that is occupied by individuals who are elderly, 
or have handicaps or disabilities sharing living space within a rental 
unit in which a group home resident assistant may be required.
    Household. One or more persons who maintain or will maintain 
residency in one rental or cooperative unit, but not including a 
resident assistant or chore service worker.
    Individual with disability. A person is considered disabled if the 
person meets the criteria or either of the following:
    1  The person has an inability to engage in any substantial gainful 
activity, but with use of auxiliary apparatus can otherwise participate 
in gainful activity, by reason of any medically determinable physical or 
mental impairment, where the disability:
    a  Has lasted or can be expected to last for a continuous period of 
not less than 12 months, or which can be expected to result in death, 
and
    b  Substantially impedes the ability to live independently, and
    c  Is of such a nature that such ability could be improved by more 
suitable housing conditions, or
    d  In the case of a sight impaired person who is at least 55 years 
old (within the meaning of sight impairment as determined in section 223 
of the Social Security Act), is unable, because of the sight impairment, 
to engage in substantial gainful activity in which he/she has previously 
engaged with some regularity over a substantial period of time.
    e  Receipt of veteran's or Social Security Disability payments 
benefits for disability, whether service-oriented or otherwise does not 
automatically establish disability.
    2  The person has a developmental disability; a severe, chronic 
disability which;
    a  Is attributable to a mental or physical impairment or combination 
of mental or physical impairment; and
    b  Was manifested before age 22; and
    c  Is likely to continue indefinitely; and
    d  Results in substantial functional limitations in three or more of 
the following areas of major life activity:
    (1) Self care
    (2) Receptive and expressive language
    (3) Learning
    (4) Mobility
    (5) Self-direction
    (6) Capacity for independent living
    (7) Economic self-sufficiency
    e  Reflects the person's need for a combination and sequence of 
special, interdisciplinary or generic care, or treatment, or for other 
services which are of lifelong or extended duration and are individually 
planned and coordinated.
    Individual with handicap.
    1  A person with a physical or mental impairment, that:
    a  Is expected to be of long-continued and indefinite duration; and
    b  Substantially impedes the person or is of such a nature that the 
person's ability to live independently could be improved by more 
suitable housing conditions.
    2  The term handicap further means, with respect to a person, a 
physical or mental impairment which substantially limits one or more 
major life activities; a record of such an impairment; or being regarded 
as having such an impairment. THIS TERM DOES NOT INCLUDE CURRENT ILLEGAL 
USE OF OR ADDICTION TO A CONTROLLED SUBSTANCE. As used in this 
definition:
    a  Physical or mental impairment includes:
    (1) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more of the following body systems: 
neurological; musculoskeletal; special sense organs; respiratory, 
including speech organs; cardiovascular; reproductive; digestive; 
genito-urinary; hemic and lymphatic; skin; and endocrine; or
    (2) Any mental or psychological disorder, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities. The term ``physical or mental 
impairment'' includes, but is not limited to, such diseases and 
conditions as orthopedic, visual, speech and hearing impairments, 
cerebral palsy, autism, epilepsy, muscular dystrophy, multiple 
sclerosis, cancer, heart disease, diabetes, human immunodeficiency virus 
(HIV) infection, acquired immunodeficiency syndrome (AIDS), mental 
retardation, emotional illness, drug addiction (other than addiction 
caused by current, illegal use of a controlled substance), and 
alcoholism.
    b  Major life activities means functions such as caring for one's 
self, performing major tasks, walking, seeing, hearing, speaking, 
breathing, learning, and working.
    c  Has a record of such an impairment means has a history of, or has 
been misclassified as having a mental or physical impairment that 
substantially limits one or more major life activities.
    d  Is regarded as having an impairment means:
    (1) Has a physical or mental impairment that does not substantially 
limit one or more major life activities but that is treated by another 
person as constituting such a limitation;

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    (2) Has a physical or mental impairment that substantively limits 
one or more major life activities only as a result of the attitudes of 
others toward such impairment; or
    (3) Has one of the impairments defined in paragraph 2 a (1) and 2 a 
(2) of this definition but is treated by another person as having such 
an impairment.
    LH. Means Farm labor housing loans and/or grants.
    Limited equity. The amount of funds which have accumulated in the 
cooperative member's patronage capital account and as further described 
in subpart E of part 1944 of this chapter.
    Low-income household. A household having an adjusted annual income 
not exceeding the maximum low-income limit stated in exhibit C of 
subpart A of part 1944 of this chapter which is periodically updated 
(available in any FmHA or its successor agency under Public Law 103-354 
Office).
    Management agent. The firm or individual engaged by the borrower and 
charged with the responsibility to manage the project in accordance with 
a written agreement.
    Management agreement. The written agreement between the borrower and 
management agent setting forth the management agent's responsibilities 
and fees for management services.
    Management fee. The compensation for providing overall management 
services for a Multiple Family Housing (MFH) project as described in the 
management plan. The fee is compensation for the time, expertise, and 
knowledge required to direct and oversee the present and future 
operation of the project. A management fee does not include the 
compensation paid to a site manager.
    Management plan. The primary management charter constituting a 
comprehensive description of the detailed policies and procedures to be 
followed in managing a project.
    Management reserve. That portion of the cooperative occupancy charge 
which is designated for payment of professional management services.
    Member/comember. A person(s) who has executed documents pertaining 
to a cooperative housing type of living arrangement and has committed 
himself/herself to upholding the cooperative concept.
    Migrant. A domestic farm laborer who works in any given local area 
on a seasonal basis and relocates his or her place of residence as farm 
work is obtained in other areas during the year.
    Minor. A person who is a Dependent of the tenant, cotenant, member 
or comember under 18 years of age. A dependent person age 18 or older 
who is a full-time student is treated as a minor.
    Moderate-income household. A household having an adjusted annual 
income within the maximum moderate-income limit stated in exhibit C of 
subpart A of part 1944 of this chapter (available in any FmHA or its 
successor agency under Public Law 103-354 Office).
    Net family assets.
    1  Net family assets include cash on hand and the value of savings, 
certificates of deposit, and dollars in checking accounts reported as 
``cash on hand.'' It will be such amounts reported on the day of third 
party verification. This definition also includes the net cash value of 
real property, cash value of whole life insurance policies, IRAs, market 
value of bonds and other forms of capital, or personal property held as 
investments, irrespective of location, minus debts against them, minus 
cost of converting such assets to cash. Examples of conversion costs are 
penalties for early withdrawal, broker/legal fees assessed to sell an 
asset, and settlement costs for real estate transactions.
    2  Net family assets also include the value of equity of any 
business or household assets disposed of by a member of the household 
for less than fair market value (including disposition in trust, but not 
in a foreclosure or bankruptcy sale) in excess of the consideration 
received therefrom during the 2 years preceding the effective date of 
certification/recertification. In the case of a disposition as part of a 
divorce settlement, the disposition shall not be considered to be for 
less than fair market value if the household member receives important 
consideration not measurable in dollar terms.
    3  Income from net family assets which is included in annual income 
is determined as follows:
    a  If net family assets equal $5,000 or less, annual income includes 
the actual income derived from the net family assets.
    b  If net family assets exceed $5,000, annual income includes the 
greater of:
    (1) Actual income derived from all net family assets, or
    (2) A percentage of the cash value of such assets based on the Bank 
Passbook annual savings rate.
    4  Net family assets exclude:
    a  Interests in Indian trust land.
    b  The value of necessary items of personal property such as 
furniture and automobile(s), and the debts against them.
    c  The assets that are a part of the business, trade, or farming 
operation in the case of any member of the household who is actively 
engaged in such operation.
    d  The value of a trust fund (i.e., for a minor or a legally 
incompetent household member) that has been established and the trust is 
not revocable by, or under the control of, any member of the household, 
so long as the fund continues to be held in trust.
    e  A vehicle specially equipped for the handicapped.
    f  Face value of life insurance policies.

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    g  A cooperative member's patronage capital in the housing 
cooperative unit in which the family resides.
    h  Prepaid funerary arrangements and expenses.
    i  Retirement funds not accessible for withdrawal by a household 
member.
    j  Assets legally owned but not accessible or that accrue income to 
someone else.
    k  Savings accounts of dependent minors when such accounts are under 
the minor's social security number.
    New housing. Newly constructed or substantially rehabilitated RRH, 
RCH, or LH project financed by FmHA or its successor agency under Public 
Law 103-354. For new construction rental assistance (RA) purposes, it 
further means before any units are occupied.
    Nonprofit corporation. A corporation which is organized and operated 
for purposes other than making gains or profits for the corporation or 
its members; is legally precluded from distributing to its members any 
gains or profits during its existence; and in the event of its 
dissolution, is legally bound to transfer its net assets to a nonprofit 
corporation of a similar type or to a public corporation which will 
operate the housing for the same or similar purposes.
    Occupancy charge. The amount of money charged a cooperative member 
to cover his/her proportionate share of the cooperative's operating 
costs and cash requirements.
    Operational housing. A completed RRH, RCH, or LH project financed by 
FmHA or its successor agency under Public Law 103-354 which has been 
opened for occupancy and has at least been partially occupied by tenants 
or members.
    Overage. The portion of a tenant's or member's net contribution to 
shelter cost that exceeds basic rent.
    Pet. A commonly accepted domesticated household animal (i.e., dog, 
cat, bird, etc.) owned or kept by a tenant or member.
    Profit basis. Applies to an individual or organizational applicant 
who will operate the housing at rental rates low- and moderate-income 
nonelderly or nonhandicapped persons, and/or elderly and persons with 
handicaps of any income can afford, where return on initial investment 
is not limited to a certain percentage per year.
    Project. A project is the total number of rental or cooperative 
housing units that are operated under one management plan with one loan 
agreement/resolution.
    RCH means Rural Cooperative Housing Loans.
    Rental agent. The individual responsible for the leasing of the 
units. If other than the borrower, this individual may be hired by the 
borrower or the management agent as specified in the management plan.
    Rental assistance (RA). RA, as used in this exhibit, is the portion 
of the approved shelter cost paid by FmHA or its successor agency under 
Public Law 103-354 to compensate for the difference between the approved 
shelter cost and the monthly tenant contribution as calculated according 
to paragraph IV of this exhibit. When the monthly gross tenant 
contribution is less than the approved utility allowance which is billed 
directly to and paid by the tenant, the owner will pay the tenant that 
difference according to paragraph IX A 2 of exhibit E of this subpart. 
RA used in cooperative housing will be calculated in the same manner.
    Resident assistant. A person(s) residing in a tenant's housing unit 
who is essential to the well-being and care of the person(s) who are 
elderly or have handicaps or disabilities residing in the unit, but is 
not obligated for the person's financial support and would not be living 
in the unit except to provide the needed support services. While the 
resident assistant may be a family member, the resident assistant may 
not be a dependent of the household for tax purposes and is not subject 
to the eligibility requirements of a tenant or member. A resident 
assistant is not a chore service worker. A resident assistant may 
function in any type of housing affected by this subpart.
    RHS means Rural Housing Site loans.
    RRH means Rural Rental Housing loans.
    Service agreement. A written agreement between the borrower and a 
service provider detailing the specific service to be provided, the cost 
of the service, and the length of time the service will be provided.
    Service plan. A written plan describing how services will be 
provided to a FmHA or its successor agency under Public Law 103-354 
financed project. At a minimum, the plan must specify the services to be 
provided, the frequency of the services, who will provide the services, 
how tenants will be advised of the availability of services, and the 
staff needed to provide the services.
    Shelter cost. Consists of basic or note rate rent plus utility 
allowance when used. Basic or note rate rent must be shown on the 
project budget for the year and approved according to paragraph XII of 
this exhibit. Utility allowances, when required, must be determined and 
approved according to part 1944, subpart E, exhibit A -6, of this 
chapter. Any changes in rental rates or utility allowances must be 
processed according to exhibit C of this subpart. The shelter cost in a 
cooperative housing project will consist of occupancy charge plus 
utility allowance.
    Site manager. The individual employed by the borrower or the 
management agent who lives at or near the project site and is 
responsible for the day-to-day operations of the project. A site manager 
residing at the project site may also be referred to as a resident 
manager. A site manager is not an ``independent contractor.''

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    Tenant contribution. The portion of the approved shelter cost paid 
by the tenant household (tenant rent). For tenants not receiving HUD 
Section 8, this amount will be calculated according to Form FmHA or its 
successor agency under Public Law 103-354 1944-8. For tenants receiving 
HUD Section 8, this will be the amount referred to on HUD Form 50059, 
``Certification and Recertification of Tenant Eligibility,'' (or other 
HUD approved Form), as family contribution. The proportion of tenant 
income and adjusted income paid as the tenant contribution will vary 
according to the type of subsidy provided to the household.
    Tenant/cotenant. A person(s) who has signed a lease and is, or will 
be, an occupant of a unit in an RRH or LH project.
    Utility allowance. A monetary allowance used by a tenant or member 
to pay the utility cost portion of their total shelter cost when such 
amounts are not otherwise included in project rents or occupancy 
charges.
    Very low-income household. A household having an adjusted annual 
income within the maximum very low-income limit stated in exhibit C of 
subpart A of part 1944 of this chapter (available in any FmHA or its 
successor agency under Public Law 103-354 office).
    III  Borrower Responsibilities:
    A  General. All borrowers are responsible for:
    1  Understanding the distinction between FmHA or its successor 
agency under Public Law 103-354 supervised credit and the credit 
provided by other Federal, State, or conventional loans.
    2  Meeting the objectives for which the loan and/or grant was made 
and complying with the respective program requirements.
    3  Understanding the unique characteristics and function of their 
particular type of borrower entity as provided by charter, articles of 
incorporation, by-laws, and/or statute.
    4  Assuring that a site manager or contact person is in close 
proximity to their MFH project.
    5  Complying with the provisions of their security instruments and 
any directive issued by FmHA or its successor agency under Public Law 
103-354.
    6  Following the approved management plan and reporting to FmHA or 
its successor agency under Public Law 103-354 any changes to the 
management plan for prior consent, and when appropriate, reporting and 
obtaining FmHA or its successor agency under Public Law 103-354 prior 
consent to any change of management agent.
    B  Borrowers without a loan agreement. Unless otherwise specified, 
these borrowers are exempt from the requirements of this subpart, except 
for exhibit C of this subpart, as long as the borrower is not in default 
of any program requirement, security instrument, payment, or any other 
agreement with FmHA or its successor agency under Public Law 103-354. 
However, except for LH borrowers not charging for on-farm labor housing, 
these borrowers must provide evidence of tenant eligibility.
    C  Borrowers with a loan and/or grant agreement in a multiple unit 
project. These borrowers are responsible for meeting the requirements 
and conditions of their agreement/resolution and the requirements of 
this subpart.
    D  Borrowers with governing bodies. The elected or appointed 
officials comprising the governing body of the borrower are responsible 
for:
    1  Maintaining records of all current members and maintaining 
membership at the required level.
    2  Holding meetings as required by the organizational documents, and 
as otherwise necessary, to provide proper control and management of its 
operations, and to keep the membership informed.
    3  Coordinating and monitoring activities of established cooperative 
committees.
    E  Borrowers with a membership. Members of a membership type 
borrower are responsible for full support of the project and operation 
by:
    1  Promptly paying any dues, fees, and other required charges.
    2  Electing responsible officials.
    3  Complying with organization rules and regulations.
    4  Participating in annual and special meetings.
    5  Participating in established cooperative committees to which they 
have voluntarily accepted assignment.
    6  Carrying out duties and services necessary to maintain the 
cooperative property for which they have voluntarily accepted 
assignment.
    F  Delegation of responsibility and authority. The borrower may 
delegate or assign management responsibilities to a property manager 
such as a management agent, a site manager, or as appropriate, a 
caretaker. Delegations or assignments of duties and responsibility will 
be included in written documents such as management agreements and job 
descriptions. FmHA or its successor agency under Public Law 103-354 will 
hold the borrower ultimately responsible for management of the project. 
FmHA or its successor agency under Public Law 103-354 may require a 
borrower to change the plan of project management and/or make 
appropriate redelegations of project management responsibility to 
achieve program objectives.
    IV  Rent Subsidy Opportunities: The available subsidy programs 
should be considered at the time of developing a project proposal and 
during project operation as they may be available to meet the tenants' 
needs. Congregate type services such as meals, limited

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homecare, medical, transportation, and social activities are not 
included in these subsidy programs. The subsidy programs are as follows:
    A  FmHA or its successor agency under Public Law 103-354 Interest 
Credit--RRH and RCH Loans. Regulations are contained in exhibit H to 
this subpart and include:
    1  Plan I--Only those borrowers who received this type of interest 
subsidy prior to October 27, 1980, may continue to utilize this Interest 
Credit Plan. Those broadly-based nonprofit corporations and consumer 
cooperatives may continue operating under this plan provided:
    a  Occupancy is limited to very-low or low-income non-elderly; very 
low-, low- and moderate-income person(s) who are elderly or have 
disabilities or handicaps.
    b  Budgets and rental rates are based on a 3 percent loan 
amortization.
    2  Plan II--This interest subsidy is available to broadly-based 
nonprofit corporations, consumer cooperatives, State or local public 
agencies, or to other organizations and individuals operating on a 
limited profit basis.
    a  Occupancy is limited to very-low, low-and moderate-income persons 
except as noted in paragraph VI D 2 i of this exhibit.
    b  Budgets are prepared showing two rental or occupancy charge 
rates, basic and note rate. The minimum (basic) rate for persons not 
receiving rental assistance is based on a 1 percent subsidized rate. The 
maximum note rate is based on the loan amortized at the interest rate 
shown in the promissory note.
    c  Tenant's or member's contribution for shelter cost, calculated 
according to the FMI for Form FmHA or its successor agency under Public 
Law 103-354 1944-8, may not exceed the highest of:
    (1) Thirty percent of monthly adjusted income, or
    (2) Ten percent of gross monthly income, or
    (3) If the household is receiving payment for public assistance from 
a public agency, the portion of such payments which is specifically 
designated by that agency to meet the household's shelter costs (see 
example in 1k of the definition of annual income in paragraph II of this 
exhibit), or
    (4) The basic rent or occupancy charge when no RA is available from 
FmHA or its successor agency under Public Law 103-354.
    d  RRH borrowers whose loans were approved on or after August 1, 
1968, may convert from Plan I to Plan II. When they are presently a full 
profit operation, they may convert to Plan II by executing a new or 
amended loan resolution or loan agreement and an interest credit and RA 
agreement according to exhibit H of this subpart.
    e  RRH borrowers with Plan I Section 8 interest credit agreements 
may change to Plan II when the 1 percent or 2 percent interest reduction 
is insufficient for the HUD contract rent to meet budgeting needs. The 
change of interest credit plan will be approved in accordance with 
paragraph VII B of exhibit C of this subpart (available at any FmHA or 
its successor agency under Public Law 103-354 office). A new Form FmHA 
or its successor agency under Public Law 103-354 1944-7, ``Multiple 
Family Housing Interest Credit and Rental Assistance Agreement,'' is 
required.
    B  Rental assistance (RA) program--FmHA or its successor agency 
under Public Law 103-354. This is a subsidy program available to RRH, 
RCH, and LH borrowers to assist very-low and low-income tenants and 
members in paying their shelter cost. RA is not authorized for tenants 
or members whose adjusted income is initially above the low-income 
level. RA is not available to LH borrowers who are individual 
farmowners, partnerships, family corporations, or an association of 
farmers. RRH borrowers with loans approved on or after August 1, 1968, 
must be operating under, or change to, Interest Credit Plan II to 
receive RA. Full profit borrowers may utilize RA by converting to a 
limited profit operation. The provisions of the RA program are covered 
in detail in exhibit E of this subpart.
    C  HUD project based Section 8 and tenant based Section 8 Rental 
Certificate or Rental Voucher Program. These subsidy programs are 
administered by HUD or others authorized to administer the program such 
as State Housing Finance Agencies or the local public housing agency. 
Projects operating under the Memorandum of Understanding between FmHA or 
its successor agency under Public Law 103-354 and HUD (available at the 
FmHA or its successor agency under Public Law 103-354 National Office, 
Washington, DC 20250) will also be subject to the requirements of the 
Housing Assistance Payments Contract executed by the borrower. Projects 
accepting tenants utilizing Section 8 rental certificates or rental 
voucher assistance assigned by a local public housing agency will also 
comply with any requirements imposed by such agency. However, in all 
cases, tenants receiving section 8 assistance must meet the eligibility 
requirements specified in paragraph VI D of this exhibit. Requirements 
that conflict with FmHA or its successor agency under Public Law 103-354 
requirements should be referred to the Servicing Official for guidance. 
(Generally, the most restrictive HUD or FmHA or its successor agency 
under Public Law 103-354 requirements or limitations will apply.)
    D  State provided subsidy. This is a subsidy program provided and 
funded by some States and available to RRH borrowers to assist tenants 
on approximately the same basis as the FmHA or its successor agency 
under

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Public Law 103-354 RA Program. The assistance is in accordance with a 
CONTRACT between the borrower and the State and concurred in by FmHA or 
its successor agency under Public Law 103-354.
    E  Privately provided subsidy. This is a subsidy program whereby the 
project owner(s) or others enter into an Agreement with FmHA or its 
successor agency under Public Law 103-354 to provide and fund subsidy to 
tenants of the project on approximately the same basis as the FmHA or 
its successor agency under Public Law 103-354 RA Program. In some 
instances, the agreement may include a limit on the number of units and 
a Per Unit Ceiling on the amount of assistance. Privately provided 
subsidies are typically referred to as private rental assistance.
    V  Management Operations:
    A  Management plan.
    1  A comprehensive management program is essential to the successful 
operation of a project. A written plan is the primary ingredient which 
should describe the detailed objectives, policies and procedures in 
managing the project. A management plan is required to be submitted to 
the Agency for all projects, new and existing, except for those on-farm 
LH units where rent is not required. The plan should be developed in 
detail commensurate to project size and complexity and should be 
reviewed annually and updated at least triennially by the borrower. To 
reflect project needs and to meet current program objectives, use of an 
addendum is permitted when few changes are made in the update of the 
plan. Exhibit B-1 of this subpart outlines the requirements of the plan.
    2  In the case of congregate housing/group homes, the management 
plan should describe, in addition to the preceding general items, the 
specific items in paragraph V B of exhibit J of this subpart.
    B  Identity of interest disclosure.
    1  General principles. FmHA or its successor agency under Public Law 
103-354 requires that applicants/borrowers and/or management agents 
describe and fully justify any identity of interest, or appearance of 
same, that exists or will exist between the borrower, management agent, 
suppliers of materials and/or services, or vendors in any combination of 
relationship. Identity of interest will be construed as existing between 
the applicant/borrower and/or management entity and suppliers of 
materials and/or services described under but not limited to any of the 
following conditions:
    a  When there is any financial interest between the applicant/
borrower and/or management entity and the supplying entity.
    b  When one or more of the officers, directors, stockholders or 
partners of the applicant/borrower or management entity is also an 
officer, director, stockholder, or partner of the supplying entity.
    c  When any officer, director, stockholder, or partner of the 
applicant/borrower and/or management entity has any financial interest 
whatsoever in the supplying entity.
    d  When the supplying entity advances any funds to the applicant/
borrower and/or management entity.
    e  When the supplying entity provides and pays on behalf of the 
applicant/borrower a