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The Rural Housing Service (FRS) Multi-Family Housing (MFH) Direct Loan Programs will issue a final rule to update 7 CFR part 3560 to implement changes related to the administration of property reserve accounts under the Multi-Family Housing (MFH) Rental Assistance (RA) program. The programs covered by this part are authorized by title V of the Housing Act of 1949, as amended. 

On January 9, 2023, the Rural Housing Service (FRS) Multi-Family Housing (MFH) Direct Loan Program published a proposed rule titled," Changes Related to Reserve Account Administration in MFH Direct Loan Programs. ”This final rule will update 7 CFR part 3560, implementing changes related to the administration of property reserve accounts under the section 515 and section 514 MFH Direct Loan programs. A 60-day comment period was provided in the proposed rule for the public to submit comments to the Agency.  The comment period closed on March 10, 2023, and FRS received two comments from one respondent that offered positive feedback on the MFH programs but did not include any direct statements regarding the subject of the proposed rule.  

As the MFH section 515 and section 514 portfolio of properties age, access to qualified third-party debt is crucial to funding needed property repair and improvements. The changes in this final rule will address this issue by adopting the changes discussed in the January 9, 2023, published proposed rule, as follows: The Reserve account will include updates to section 7 CFR 3560.306 (d)(2) by explicitly including other third-party debt as an allowable use of surplus cash funds, allowing borrowers to access state and local government funding available as a capital source for property improvements.

These changes are expected to improve property condition and increase tools available to borrowers to preserve properties as affordable housing resources while benefiting Low -and moderate-income tenants living MFH units with improved physical condition of the properties. These changes are designed to improve property condition and to preserve properties as affordable housing resources. The final rule will also clarify the requirements for project reserve accounts to include other third-party debt as an allowable use of funds, permitting borrowers to access state and local government funding available as a source of capital for property improvements.