[Federal Register: February 8, 2005 (Volume 70, Number 25)]
[Rules and Regulations]
[Page 6551-6553]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe05-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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[[Page 6551]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3550
RIN 0575-AC54
Direct Single Family Housing Loans and Grants
AGENCY: Rural Housing Service, USDA.
ACTION: Direct final rule.
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SUMMARY: Through this action, the Rural Housing Service (RHS) is
revising and clarifying the definition for an existing dwelling and a
new dwelling or unit, removing specific dollar limits with regards to
insurance deductible clauses, and establishing the amount of insurance
required to conform to industry standards. These changes are being made
to make more clear what constitutes an existing and a new dwelling, and
to conform insurance coverage requirements to industry standards. The
intended effect is to improve the delivery and implementation of the
Direct Single Family Housing programs.
DATES: This rule is effective April 25, 2005, unless we receive written
adverse comments or written notices of intent to submit adverse
comments on or before April 11, 2005.
ADDRESSES: You may submit comments to this rule by any of the following
methods:
Agency Web site: http://rdinit.usda.gov/regs/. Follow the
instructions for submitting comments on the Web site.
E-Mail: comments@usda.gov. Include the RIN number (0575-
AC54) in the subject line of the message.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Submit written comments via the U.S. Postal Service
to the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW.,
Washington, DC 20250-0742.
Hand Delivery/Courier: Submit written comments via Federal
Express Mail or another mail courier service requiring a street address
to the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, 300 7th Street, SW., Washington, DC 20024.
All written comments will be available for public inspection during
regular work hours at the 300 7th Street, SW., address listed above.
FOR FURTHER INFORMATION CONTACT: Janet L. Carter, Senior Loan
Specialist, Rural Housing Service, Stop 0783; 1400 Independence Avenue,
SW., Washington, DC 20250-0783; Telephone: 202-720-1489; Fax: 202-690-
3555; e-mail: Janet.Carter@usda.gov.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be not significant and was not
reviewed by the Office of Management and Budget (OMB) under Executive
Order 12866.
Paperwork Reduction Act of 1995
The information collection requirements contained in this
regulation have been approved by OMB under the provisions of 44 U.S.C.
chapter 35 and have been assigned OMB control number 0575-0172, in
accordance with the Paperwork Reduction Act (PRA) of 1995. This rule
does not impose any new or modified information collection
requirements.
GPEA Statement
RHS is committed to compliance with the Government Paperwork
Elimination Act (GPEA), which requires Government agencies, in general
to provide the public the option of submitting information or
transacting business electronically to the maximum extent possible.
Civil Justice Reform
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. In accordance with this rule: (1) All State and local
laws and regulations that are in conflict with this rule will be
preempted; (2) no retroactive effect will be given to this rule; and
(3) administrative proceedings in accordance with the regulations of
the National Appeals Division of USDA in 7 CFR part 11 must be
exhausted before bringing suit in court challenging action taken under
this rule, unless those regulations specifically allow bringing suit at
an earlier time.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, 2
U.S.C. 1532, RHS generally must prepare a written statement, including
a cost-benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local, or tribal
governments, in the aggregate, or to the private sector, of $100
million or more in any one year. When such a statement is needed for a
rule, section 205 of the UMRA generally requires RHS to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, more cost-effective or least burdensome alternative that
achieves the objectives of the rule. This rule contains no Federal
mandates (under the regulatory provisions of Title II of the UMRA) for
State, local, and tribal Governments or the private sector. Therefore,
this rule is not subject to the requirements of sections 202 and 205 of
the UMRA.
Programs Affected
The programs affected by this final rule are 10.410 Very Low to
Moderate Income Housing Loans and 10.417 Very Low-Income Housing Repair
Loans and Grants.
Intergovernmental Consultation
For the reasons set forth in the final rule related Notice to 7 CFR
part 3015, subpart V, these programs are not subject to Executive Order
12372 which requires intergovernmental consultation with State and
local officials.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' It is the determination of RHS
that this action does not constitute a major Federal action
significantly affecting the quality of the human environment, and
[[Page 6552]]
in accordance with the National Environmental Policy Act of 1969, Pub.
L. 91-190, an Environmental Impact Statement is not required.
Regulatory Flexibility Act
This rule has been reviewed with regard to the requirements of the
Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has
determined and certified by signature of this document that this rule
will not have a significant economic impact on a substantial number of
small entities since this rulemaking action does not involve a new or
expanded program.
Background
It is the policy of RHS to publish rules determined to be non-
controversial and unlikely to result in adverse comments as direct
final rules. RHS Policy for direct final rules was published on March
27, 2003 at 68 FR 14889. No adverse comments are anticipated on the
changes in this rule. Adverse comments suggest that the rule should not
be adopted or that a change should be made to the rule. Unless any
adverse comments are received within 60 days of publication, this rule
will be effective 75 days from the date of publication.
Definition of Existing Dwelling
According to 7 CFR 3550.10, an existing dwelling is currently
defined as a dwelling that is more than 1 year old, or less than 1 year
old and covered by an approved 10-year warranty plan. 7 CFR 3550.10
further defines a new dwelling as a dwelling that is to be constructed,
or an already-existing dwelling that is less than 1 year old and is not
covered by an approved 10-year warranty plan. This gives the impression
that the major difference between a new and existing dwelling is
coverage by a 10-year warranty plan. This has been a cause for much
confusion with field staff, applicants, contractors, and Realtors. The
10-year warranty allows the Agency to provide full financing on homes
that are less than 1 year old when there is not other means of adequate
and verifiable documentation of construction quality of new dwellings.
This change will simplify the definitions of new and existing homes but
does not otherwise change any policy on how new and existing homes are
financed. The only anticipated impact of this change is clarity on what
constitutes a new or existing dwelling for the purposes of financial
assistance through the Direct Single Family Housing programs. No change
will result from this revision regarding the applicability or value of
a 10-year warranty.
Insurance Deductible Clauses
According to 7 CFR 3550.61(b) and 7 CFR 3550.110(b) essential
buildings must be insured in an amount at least equal to the balance of
the secured debts. Many companies are reluctant to issue policies when
the coverage is well in excess of the replacement value of the home.
This is a particular problem in areas of high land costs and makes it
extremely difficult for borrowers/homeowners to secure affordable
insurance coverage. In addition, according to 7 CFR 3550.61(d) and 7
CFR 3550.110(d) loss deductible clauses may not exceed $250 or 1
percent of the insurance coverage, whichever is greater. The deductible
for any 1 building may not exceed $750. The cost of housing has risen
dramatically and so has the cost of insurance. Some companies are
reluctant to provide coverage with deductible clauses with a low dollar
threshold. This makes it very difficult for new homeowners to secure
affordable insurance coverage.
The change in this requirement conforms with industry standards and
will adequately protect both the borrower's and the government's
interest. With this change, the borrower will be asked to insure their
house in an amount that is the lesser of 100% of the insurable value
(i.e. the cost to restore the property back to its state prior to a
loss) of the house or the unpaid principal balance. The loss deductible
clause requirement will be based on the higher of 1% of the face value
of the policy or $1,000 unless state law requires a higher maximum
deductible amount. This change will make it easier for applicants to
secure affordable insurance coverage.
List of Subjects in 7 CFR Part 3550
Administrative practice and procedure, Conflict of interests,
Environmental impact statements, Equal credit opportunity, Fair
housing, Accounting, Grant programs--Housing and community development,
Housing, Loan programs--Housing and community development, Low and
moderate income housing, Manufactured homes, Reporting and
recordkeeping requirements, Rural areas, Subsidies.
0
For the reasons stated in the preamble, chapter XXXV, Title 7 of the
Code of Federal Regulations, is amended as follows:
PART 3550--DIRECT SINGLE FAMILY HOUSING LOANS AND GRANTS
0
1. The authority citation for part 3550 continues to read as follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Subpart A--General
Section 3550.10 is amended by revising definitions for ``existing
dwelling or unit'' and ``new dwelling'' to read as follows:
Sec. 3550.10 Definitions.
* * * * *
Existing dwelling or unit. A dwelling or unit that has either been
previously owner-occupied or has been completed for more than 1 year as
evidenced by an occupancy permit, certificate of occupancy or similar
document issued by the local authority.
* * * * *
New dwelling or unit. A dwelling that is to be constructed, or a
dwelling that is less than 1 year old as evidenced by an occupancy
permit, certificate of occupancy or similar document issued by the
local authority and has never been occupied.
* * * * *
Subpart B--Section 502 Origination
0
2. Section 3550.61 is amended by revising paragraphs (b) and (d)(1) to
read as follows:
Sec. 3550.61 Insurance.
* * * * *
(b) Amount. The dwelling and any other essential buildings must be
insured in an amount that is the lesser of 100% of the insurable value
(i.e. the cost to restore the property back to its state prior to a
loss) of the house or the unpaid principal balance.
* * * * *
(d) * * *
(1) Loss deductible clauses for required insurance coverage may not
exceed the higher of 1% of the face value of the policy or $1,000
unless state law requires a higher maximum deductible amount.
* * * * *
Subpart C--Section 504 Origination and Section 306C Water and Waste
Disposal Grants
0
3. Section 3550.110 is amended by revising paragraphs (b) and (d)(1) to
read as follows:
Sec. 3550.110 Insurance (loans only).
* * * * *
(b) Amount. The dwelling and any other essential buildings must be
insured in an amount that is the lesser of 100% of the insurable value
of the house or the unpaid principal balance.
* * * * *
(d) * * *
[[Page 6553]]
(1) Loss deductible clauses for required insurance coverage may not
exceed the higher of 1% of the face value of the policy or $1,000
unless state law requires a higher maximum deductible amount.
* * * * *
Dated: December 27, 2004.
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. 05-2429 Filed 2-7-05; 8:45 am]