The Rural Housing Service (RHS) published a proposed rule on August 4, 2022 [87 FR 47646] to amend the Single-Family Housing Guaranteed Loan Program (SFHGLP) regulation found in 7 CFR part 3555.  A 60-day comment period was provided for the proposed rule, which closed on October 3, 2022.  RHS received comments from 41 respondents, of which one of the comments was not applicable to the contents of the rule.  Of the comments received, 30 were from mortgage lenders, one was from a public assistance agency, and ten were from other members of the public. 

As a result of the comments received, the Agency will also add 7 CFR 3555.55 to grant Delegated Lenders the authority to approve and execute loan guarantees with limited to no involvement of Agency staff. The provisions include the following:

 (1) The Agency may grant Delegated Lenders the authority to approve loans and obtain Loan Note Guarantees with limited to no involvement of Agency staff.

 (2) The Agency would reserve the right to suspend or terminate any lender’s delegated status for reasons including, but not limited to, underwriting loans which do not meet Agency guidelines, providing data to the Agency’s automated underwriting system which is not supported by documentation retained by the lender, maintaining a portfolio that does not meet the established delinquency, loss claim, and default rate performance metrics, and other criteria described in Agency loan program requirements in 7 CFR 3555, and any other regulatory guidance issued.

 (3) Delegated Lenders would be required to use the Agency’s automated underwriting system as described in 3555.107(b) Automated underwriting.”

 (4) The Agency would monitor ongoing delegated authority (DA) eligibility using regular collection and analysis of loan level data and performance, as well as through lender oversight reviews/examinations.

The Agency anticipates including in the Final Rule the opportunity for Delegated Lenders to submit files to the Agency for review and approval, in some circumstances.  In addition, the Agency will consider the recommendations on oversight sample size and the roll-out timeframe in development of the final rule.

The changes to 7 CFR 3555 are expected to improve the efficiency of the delivery of the SFHGLP, align Agency practices with industry standards, and provide the public, specifically low- and moderate-income households, with faster and better service by eliminating Agency intervention at loan origination through closing.