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Statement of Need: Formalizing the loan application process will allow for Agency oversight; it will also ensure minimum competency standards. By establishing a vast network of competent, experienced, and committed Agency-certified packagers, this action will benefit low- and very low-income people who wish to achieve homeownership in rural areas by increasing their awareness of the Agency's housing program, increasing specialized support available to them to complete the application for assistance, and improving the quality of loan application packages submitted on their behalf.

Summary of the Legal Basis: The SFH direct loan program was authorized by the Housing Act of 1949, as amended.

Alternatives: The alternative to implementing a certified loan application packaging process is maintaining the status quo, which is problematic for the following reasons: With voluntary early retirement authority and voluntary separation incentive payments offered in the first quarter of Fiscal Years 2012 and 2013, the number of Rural Development staff available to process section 502 loan applications has been severely reduced. Without operational restructuring and redistribution, program participants will experience unprecedented and significant delays in loan application processing. The current procedure allows loan application packaging under an informal arrangement, which results in inconsistencies in the packagers' level of program knowledge and expertise as well as their level of service. Limited travel budgets restrict the Rural Development staffs' ability to target underserved areas (such as Indian reservations, colonias counties, and persistent poverty counties).

Anticipated Costs and Benefits: Cost/benefit to the borrowers: With an interest rate of 3.75%, which is the program's full note interest rate that has been in effect as of September 2013, and with a standard term of 33 years, a packaging fee of $1,500 will cost the borrower $6.62/month ($1,500 x .00441; the amortization factor for this extra loan amount). Because many borrowers receive the maximum payment assistance allowed, the amount billed for the fee may be reduced down to $4.46/month ($1,500 x .00297 the amortization factor for this extra loan amount at 1% for 33 years). In FY 2012, the families served through the direct single family housing program had an average annual income of $27,600. At most, the increase in the monthly payment represents .02 percent of the allowable qualifying ratios ($6.62/$27,600). All other factors aside, the packaging fee should not adversely impact an applicant's eligibility. For borrowers that choose to apply through the certified loan application packaging process, their increased loan costs are more than offset by the benefits they will experience (largely being made aware of an affordable homeownership program that they may not have otherwise heard of because of the Agency's reduced physical presence in rural areas and having a knowledgeable and committed packager hold their hand through the entire application process). Cost/benefit to the Agency: The training costs associated with this action is approximately $39,600 per fiscal year in comparison to maintaining the status quo. The one-time cost to modify the program's loan origination system to create a new data element to track applications obtained through the certified loan application process is $100,000. Implementing a certified loan application process will save the Agency approximately $1.5 million in salaries and expenses per fiscal year in comparison to maintaining the status quo.

Risks: There may be some limited opposition to the loan application packaging fee from affordable housing advocates, but the Agency believes the substantial measure by which the process's merits outweigh potential drawbacks will be widely recognized. The loan application packaging fee outlined in the proposed rule is significantly higher than the amount currently allowed. However, the fee also ensures critical outreach and support for families and individuals who might otherwise have little chance of securing a mortgage. Moreover, engaging the services of a certified packager is completely at the applicant's discretion-the borrower has the option of electing to proceed without the additional assistance afforded by the fee. The allowable fee reflects the additional responsibilities that will be placed on those involved in the certified loan application packaging process (principally submitting viable loan application packages to expedite the Agency's underwriting review); and the fee can be financed with the SFH loan, adding little to the required monthly payment. The rule also furthers the government's partnering opportunities with private organizations. The proposed certification process is not mandatory. Individuals and entities that do not meet the requirements for certification may still package on behalf of an applicant but any fee charged will not be an allowable loan purpose.