The purpose of the Guaranteed Rural Rental Housing Program (GRRHP) is to increase the supply of affordable rural rental housing by using loan guarantees to encourage partnerships between the Rural Housing Service (RHS or Agency), private lenders, and public agencies. 7 CFR part 3565 (Part 3565) sets forth the regulation requirements for the GRRHP which prescribes the policies, authorizations, and procedures for the guarantee of multifamily loans authorized by Section 538, Title V, of the Housing Act of 1949.

To preserve affordable housing, Part 3565 requires that properties that are financed with a Section 538 GRRHP loan be used for occupancy by low- and moderate-income households and remain as affordable rental housing for the original term of the loan. To codify this requirement, Part 3565 requires restrictive use language to be outlined in a separate deed restriction. Part 3565, currently, does not specify that the separate deed restriction be recorded.  Only recorded documents will convey with the property if the mortgage and/or deed of trust is prepaid or if the loan transfers to new ownership.  The Agency is proposing to amend 7 CFR part 3565.352(b) by adding language that states the separate deed restriction (containing the restrictive use language) must be recorded.

The Agency expects that this regulatory change would provide a better customer experience by allowing the Agency to enforce the restrictive use requirement to maintain affordability if the loan guaranteed by the Section 538 GRRHP is prepaid.