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RURAL RENTAL HOUSING PROGRAM
SECTION 515
RD REGULATION 7 CFR 3560

The purpose of the Rural Rental Housing Program is to provide eligible tenants economically designed and constructed rental housing and related facilities suited to their living requirements in rural areas (communities with less than 20,000 population).

Eligible Occupants Families, individuals, senior citizens (age 62 or over) and persons with a disability with very low, low, and low to moderate incomes.

Eligible Applicants The application will be in the form of a letter to the Area or Sub-Area office which would include: Non profit organizations, Limited Profit borrowers (individual, partnerships [general and limited], and corporations), consumer cooperative or public body. Limited Profit borrowers must agree to limit their return on their initial investment to 8%. Applicants must have ability and experience to operate and manage the development successfully.

Terms 30 year loan with 50 year amortization at current lending rate.

Loan Limitations
  • Maximum loan for non profits, consumer cooperatives, or State or local public agencies, will be limited to the total development cost or appraised value, whichever is less.
  • For Limited Profit applicants receiving Low-Income Housing Tax Credits, the amount of the loan will be limited to no more than 95% of the development cost or appraised value, whichever is less.
  • For all other applicants not receiving any benefits from Low-Income Housing Tax Credits, the loan amount will be limited to no more than 97 percent of the development cost or appraised value, whichever is less.

Loan Purposes
  • New Construction
  • Purchase and rehabilitate existing buildings only when the loan for such rehabilitation does not exceed by 5% the loan for new construction in the same area
  • Purchase and improve the necessary land on which the housing will be located
  • Develop other related facilities in connection with the housing such as community room, recreation area or office

Applications Dates governing the invitation and review of applications will be published in the Federal Register annually. Application packets can be picked up at any USDA Rural Development office throughout the state. They are processed by one of our seven area offices located throughout the state.

Subsidies
  • NTEREST CREDIT - Interest rate reduction to 1% depending on the tenant's adjusted income. Owner will have two rents (basic and note). Basic rents are rents needed to pay operating and maintenance expenses plus loan payment at 1% for 50 years. Note rate rents are rents needed to pay operating and maintenance expenses plus loan payment at note rate interest for 50 years. Tenants pay based on 30% of their adjusted household income within the basic and note rate rent schedule.
  • RENTAL ASSISTANCE - This is a deeper subsidy which pays the difference between 30% of the tenant's adjusted income and basic rent. This is a project based subsidy. Currently we have over 8900 units of rental assistance throughout the state.
  • OTHER SUBSIDIES - State Rental Assistance is available to some new construction properties through the Missouri Housing Development Commission (MHDC). Also, existing Section 8 assistance is available through various housing agencies throughout the state. This is a tenant based subsidy which goes with the tenant wherever they live.

Servicing Issues We currently have approximately 780 borrowers totaling a little over 18,350 rental units. Borrowers are required to prepare annual financial reports and budgets for review and approval by USDA Rural Development. Every three years a detailed supervisory visit and property inspection is made by USDA Rural Development to assure compliance with the borrowers loan agreement or resolution, Promissory Note, Deed of Trust, and our regulations. Borrowers with special needs or problems may need visits at more frequent intervals.

Owners are required to verify and certify tenants income and assets on an annual basis. They must also submit monthly payments with a project worksheet showing overage charged and rental assistance needs if applicable.

Special Servicing Options
  • Special Note Rent (SNR) - reduced market rents when area private market rents are less than our note rate rent and vacancies result
  • Subordinations
  • Consent to Junior Liens
  • Reamortizations
  • Transfers - Sell property to new owner agreeing to abide by restrictions of the properties loan agreement/or resolution and legal documents
  • Consolidations
  • Severance Agreements

Restrictive Use Provisions
  • BORROWERS WITH LOANS PRIOR TO 12-21-79 - Do not have any restrictive use provisions in their legal documents. They may prepay their loans only under certain conditions. USDA Rural Development may make equity loan offer along with other incentives to not prepay. USDA Rural Development must review request and determine what conditions, if any, must happen in order to prepay.
  • BORROWERS WITH LOANS BETWEEN 12-21-79 AND 12-15-89 - These borrowers have signed a 20 year restrictive use provision in their legal documents. They can prepay under certain conditions but are more controlled. USDA Rural Development may make incentive offer but cannot make an equity loan offer. USDA Rural Development must again review and determine what conditions apply if prepayment is allowed.
  • BORROWERS WITH LOANS AFTER 12-15-89 - These loans may not prepay for the life of the loan.

Regulations
  • 7 CFR 3560
  • Handbook-1-3560 MFH Loan Origination Handbook
  • Handbook-2-3560 MFH Asset Management Handbook
  • Handbook-3-3560 MFH Project Servicing Handbook

Last Modified:06/14/2012 
 
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