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GUARANTEED RURAL RENTAL HOUSING PROGRAM
SECTION 538
RD REGULATION 7 CFR 3565

The purpose of the Guaranteed 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 Borrowers
  • Must intend to provide and maintain rural rental housing
  • Must have ability and experience to meet the property management requirements of the agency, lender, and loan agreement
  • Ownership entities must be a valid entity in good standing under the laws of the jurisdiction in which it is organized
  • Must have legal and financial capacity to meet all of the obligations of the loan
  • Eligible borrowers must be US Citizens or US Owned Corporations, or organizations in which the principals are US Citizens or permanent legal residents, and include, but may not be limited to:    Individuals, corporations, State or local public agencies, partnerships, cooperative housing, trusts, Indian tribes
  • Must have the ability and experience to construct or rehabilitate multi-family housing that met the requirements of the agency, the lender, and the loan agreement

Eligible Lenders The application will be in the form of a letter to the Area or Sub-Area office which would include: Those approved and considered eligible by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corp., the Federal Home Loan Bank members, or the Department of Housing and Urban Development qualify as an eligible lender if they are currently active with the multi-family housing program. State Housing Finance Agencies are also considered eligible. Other lenders have the opportunity to enter into a correspondent bank relationship with approved lenders in order to participate in the program.

Terms Repayment term cannot exceed 40 years or the remaining economic life of the project, whichever is less. The interest rate cannot exceed the maximum rate specified in the Notice of Funding Availability (NOFA). The rate must be fixed for the life of the loan.

Loan Purposes
  • New construction and/or purchase and rehabilitation of buildings. Purchase and improve land on which the housing will be located
  • Development of related facilities (community space, recreation, storage or maintenance structures), except high cost facilities such as swimming pools and exercise clubs
  • Construction of on-site management or maintenance offices and living quarters for operating personnel for the property being financed
  • Purchase and install appliances and develop the surrounding grounds, including parking, signs, landscaping and fencing
  • Construction interest accrued on the construction loan, relocation assistance in the case of rehabilitation projects, and developers' fees
  • Costs for feasibility determination, loan application fees, appraisals, environ-mental documentation, professional fees or other fees determined by the agency to be necessary to the development of the project
  • Costs associated with the revitalization, repair, and transfer of existing RD financed Section 515 rural rental housing properties. The minimum amount required is $6,500 per unit.

Location and Loan Amounts Loans must be located in rural communities with less than 20,000 population. Maps outlining rural areas may be obtained from any USDA Rural Development office located in a county with a city over 20,000 population. Loans to non profit organizations or agencies or bodies of state, local or tribal government will be limited to 97% of the development cost or the lenders determination of value not to exceed the appraised value of the housing and facilities. All other entities will be limited to 90% of the development cost or appraised value.

Restrictions Rent for any individual unit, including utilities, must not exceed an amount equal to 30% of 115% of area median income, adjusted for family size. Also, on an annual basis, the average rent for the project must not exceed 30% of 100% of area median income, adjusted for family size.

Guarantee Amount and Fee The initial fee will be equal to 1% of the guarantee amount. An application fee of $2,500 will be collected when a formal application is filed. An annual fee of at least .5% of the outstanding principal amount will be charged each year that the guarantee is in effect. The maximum guarantee for a permanent loan will be 90% of the unpaid principal and interest of the loan.

Application Process Notice of Funding Availability will be announced annually in the Federal Register giving instructions on when and where applications will be accepted.

Preservation Loans must remain affordable to eligible households for the term of the loan, unless the project is determined to be no longer needed or the lender acquires title to the property through foreclosure or deed-in-lieu of foreclosure. This requirement is statutory.

Last Modified:06/14/2012 
 
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