To ensure regulations clearly document current agency practice, the Rural Housing Service (RHS) Multi-Family Housing (MFH) Direct Loan and Grant Program has identified the need for updating its regulations, so they provide all affected parties with the requirements to qualify and participate in agency programs. The agency is considering amending 7 CFR part 3560 to clarify requirements for applying and participating in the program, including the requirements for how the agency obtains credit reports and the requirements of the Capital Needs Assessment (CNA) will be fully codified.

Borrowers must maintain MFH projects in accordance with local, state, and Federal laws and regulations, establish a maintenance system, and develop a capital budget and planning process. Part of this process is developing a CNA to support the projects reserve account. 7 CFR 3560.103(c)(2) currently requires a CNA to support the reserve replacement account, however, the agency has relied on guidance documents issued to staff to communicate the requirements of what information would be acceptable to the agency to document the CNA. The agency is considering codifying the detailed requirements of the CNA to ensure that the regulations clearly  outline the full requirements of an acceptable CNA which is a key component for the restructuring of loans for existing rural rental housing and off farm labor housing projects ensuring sufficient reserves are in place to meet major repairs and improvements over the lifetime of the property.

The agency is also proposing to change the process by which it obtains credit reports from applications and borrowers for all MFH servicing actions. Currently 7 CFR 3560.56(d)(5) provides that for initial loan applications, eligibility and feasibility will be determined based on an analysis of current credit reports. The agency collected a credit report fee from applicants during the application process and agency staff obtained the required credit report through a contract with credit reporting agencies. The agency relied on various internal communications to staff to provide information on the requirements. To expedite the application process for applicants and approval of certain servicing actions, the agency is considering accepting credit reports obtained from applicants and borrowers and ceasing collection of the fee during the application process or prior to approving certain servicing actions.

The intended changes are to improve customer experience with updated and understandable insurance requirements. Insurance premiums, including those for hazard/property insurance required by the Agency, are increasing at an alarming rate due to changes in the economics of the insurance industry. Stakeholders will benefit from these proposed changes through lower insurance premiums and more flexibility in choices of coverage and deductibles.