[Federal Register Volume 75, Number 43 (Friday, March 5, 2010)]
[Proposed Rules]
[Pages 10194-10195]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-4495]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 75, No. 43 / Friday, March 5, 2010 / Proposed 
Rules

[[Page 10194]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3550

RIN 0575-AC81


Direct Single Family Housing Loans and Grants

AGENCY: Rural Housing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: Through this action, the Rural Housing Service (RHS) is 
proposing to amend its regulations for the Direct Single Family Housing 
Loans by reinstating language to enable full repayment of the entire 
subsidy in event of foreclosure or deed-in-lieu of foreclosure 
(voluntary conveyance). This action will clarify that in the event of 
foreclosure or deed-in-lieu of foreclosure (voluntary conveyance) the 
RHS will recapture the full subsidy from the value of the property.

DATES: Written comments must be received on or before May 4, 2010 to be 
assured for consideration.

ADDRESSES: You may submit comments to this rule by any of the following 
methods: Agency Web Site: http://www.rurdev.usda.gov/regs/. Follow the 
instructions for submitting comments on the Web Site.
     E-Mail: comments@wdc.usda.gov. Include the RIN number 
(0575-AC81) in the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or another mail courier service requiring a street address 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Suite 701, 
Washington, DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., address listed above.

FOR FURTHER INFORMATION CONTACT: Janet L. Carter, Senior Loan 
Specialist, Rural Housing Service, Stop 0783, 1400 Independence Avenue, 
SW., Washington, DC 20250-0783, Telephone: 202-720-1489.

SUPPLEMENTARY INFORMATION: 

Classification

    This rule has been determined to be not significant and was not 
reviewed by the Office of Management and Budget (OMB) under Executive 
Order 12866.

Paperwork Reduction Act of 1995

    There are no new reporting and recordkeeping requirements 
associated with this rule.

E-Government Act Compliance

    The RHS is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Civil Justice Reform

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. In accordance with that Executive Order: (1) All State 
and local laws and regulations that are in conflict with this rule will 
be preempted; (2) No retroactive effect will be given to this rule; and 
(3) Administrative proceedings in accordance with the regulations of 
the National Appeals Division of USDA at 7 CFR part 11 must be 
exhausted before bringing suit in court challenging action taken under 
this rule unless those regulations specifically allow bringing suit at 
an earlier time.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, 2 
U.S.C. 1532, RHS generally must prepare a written statement, including 
a cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires RHS to identify and 
consider a reasonable number of regulatory alternatives and adopt the 
least costly, more cost-effective or least burdensome alternative that 
achieves the objectives of the rule. This rule contains no Federal 
mandates (under the regulatory provisions of Title II of the UMRA) for 
State, local, and tribal Governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Programs Affected

    The programs affected by this proposed rule are 10.410, Low to 
Moderate Income Housing Loans and 10.417, Very Low-Income Housing 
Repair Loans and Grants.

Intergovernmental Consultation

    For the reasons set forth in the final rule related Notice to 7 CFR 
part 3015, subpart V, these programs are not subject to Executive Order 
12372 which requires intergovernmental consultation with State and 
local officials.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It is the determination of RHS 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment, and in 
accordance with the National Environmental Policy Act of 1969, Public 
Law 91-190, an Environmental Impact Statement is not required.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has 
determined and certified by signature of this document that this rule 
will not have a significant economic impact on a substantial number of 
small entities. This rule reinstates a requirement on Agency applicants 
and borrowers; however, the requirement of full subsidy recapture in 
event of foreclosure or voluntary conveyance will apply solely to the 
individual applicants and borrowers of Section 502

[[Page 10195]]

Direct Single Family Housing financing and will not apply to small 
entities. There will be no significant information collection, or 
regulatory requirements imposed on small entities under this proposed 
rule.

Federalism

    The policies contained in this rule do not have any substantial 
direct effect on States, the relationship between the National 
Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose a substantial direct compliance cost on State and local 
Governments. Therefore, consultation with the States is not required.

Background

    In the event of a foreclosure or deed-in-lieu of foreclosure 
(voluntary conveyance), the original recapture regulation promulgated 
on October 1, 1979 provided for recapture of the full amount of subsidy 
granted in determining the balance owed. However, when the Section 502 
SFH direct loan program was restructured on November 22, 1996, the 
revised recapture regulation, 7 CFR 3550.162, this provision was 
omitted. Therefore, because of the omission of the critical language in 
the regulation, full recovery is not currently supported by regulatory 
authority.
    Foreclosure or deed-in-lieu of foreclosure (voluntary conveyance) 
is a last resort to protect the government's interest after all other 
servicing actions have failed. Recovery of some or the entire payment 
subsidy provided to direct single family housing borrowers or 
``recapture'' is provided for by statute in 42 U.S.C. 1490a(a)(1)(D). 
The statute gives the Secretary broad discretion in determining the 
amount of the subsidy recapture.
    Currently, there is no clear regulatory authority in 7 CFR 3550 for 
full recovery of the payment assistance subsidy that the borrower 
receives as was provided for in the original regulation. In addition, 
prior to the revision of the original recapture regulation in 1996, the 
Subsidy Repayment Agreement also provided that the full amount of the 
subsidy was repayable in the event of a foreclosure or deed in lieu of 
foreclosure (voluntary conveyance). The current Subsidy Repayment 
Agreement only provides for the formula calculation of the subsidy for 
repayment. Further, there was no discussion in the preamble 
implementing the proposed and final rules regarding an intent to change 
this provision. This rule will clarify the subsidy repayment 
requirement in event of foreclosure or deed-in-lieu of foreclosure 
(voluntary conveyance) by restoring the original regulatory authority 
and policy of full recovery of the subsidy in these foreclosure 
situations. The current Subsidy Repayment agreement will be revised to 
reflect the language of the regulation once the proposed regulation is 
finalized. Recovery of the subsidy will only come from proceeds from 
the sale of the property. The borrower will not be personally liable 
for any deficiency in repayment of the full subsidy to the Agency as a 
result of this action and the Agency will not seek to recover unpaid 
subsidy from assets of the borrower other than the property which was 
security for the loan.

List of Subjects in 7 CFR Part 3550

    Administrative practice and procedure, Conflict of interests, 
Environmental impact statements, Equal credit opportunity, Fair 
housing, Accounting, Housing, Loan programs--Housing and community 
development, Low and moderate income housing, Manufactured homes, 
Reporting and recordkeeping requirements, Rural areas, Subsidies.

    For the reasons stated in the preamble, chapter XXXV, Title 7 of 
the Code of Federal Regulations, is proposed to be amended as follows:

PART 3550--DIRECT SINGLE FAMILY HOUSING LOANS AND GRANTS

    1. The authority citation for part 3550 continues to read as 
follows:

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

Subpart A--General

    2. Section 3550.162 is revised to read as follows:


Sec.  3550.162  Recapture.

    (a) Recapture policy. Borrowers with loans approved or assumed on 
or after October 1, 1979, will be required to repay subsidy amounts 
received through payment subsidy or deferred mortgage assistance. 
Amounts to be recaptured are due and payable in the event of 
foreclosure or when the borrower transfers title or ceases to occupy 
the property. The real estate that secures the loan is the only 
security for the repayment of the subsidy granted on the loan. The 
repayment of subsidy is not a personal obligation of the borrower and 
no amount attributed to subsidy shall be included in any deficiency 
sought to be collected from a borrower after a voluntary conveyance or 
foreclosure.
    (b) Amount to be recaptured. (1) The maximum amount to be 
recaptured is the amount of principal reduction attributed to subsidy 
and the lesser of:
    (i) The amount of subsidy received; or
    (ii) 50 percent of the value appreciation.
    (2) Foreclosure or deed-in-lieu of foreclosure (voluntary 
conveyance). Notwithstanding the provisions of paragraph (b)(1) of this 
section the unpaid balance of loans being liquidated by deed-in-lieu of 
foreclosure (voluntary conveyance) to the government or foreclosure 
shall include the total amount of subsidy that has been granted on the 
loan.
    (3) The value appreciation of property with a cross-collateralized 
loan is based on the market value of the dwelling and lot. If located 
on a farm, the lot size would be a typical lot for a single family 
housing property.
    (4) Interest reduced from the promissory note rate to six percent 
under the Service member Civil Relief Act (SCRA) is not subject to 
recapture.

    Dated: January 28, 2010.
Tammye Trevi[ntilde]o,
Administrator, Rural Housing Service.
[FR Doc. 2010-4495 Filed 3-4-10; 8:45 am]
BILLING CODE 3410-XV-P