# 2026-19659: USDA tweaks loan rules to save rural rentals from red tape 2026-19659, Multifamily Housing Preservation Pilot and Multifamily Housing Guaranteed Loan Notice of Loan-to-Cost Percentage Change for Option 3 (Continuous Guarantee), is a Federal Register notice from Agriculture Department, Rural Housing Service published 2026-09-25, effective 2026-10-09; PRIA reads it as touching household money (as of 2026-10-02). - Canonical: https://policyrisk.com/federal-register/2026-19659 - As of: 2026-10-02 - Plain-text twin of the page above; the HTML and this file carry the same facts. ## Facts - Document number: 2026-19659 - Title: Multifamily Housing Preservation Pilot and Multifamily Housing Guaranteed Loan Notice of Loan-to-Cost Percentage Change for Option 3 (Continuous Guarantee) - Type: Notice - Agencies: Agriculture Department; Rural Housing Service - Citation: 91 FR 60930 - Published: 2026-09-25 - Effective: 2026-10-09 - Comments close: not stated - Significant: no - Touches household money: yes - Regulation identifier numbers: none - Last updated: 2026-10-02 ## In one line USDA tweaks loan rules to save rural rentals from red tape ## Summary The USDA’s Rural Housing Service is launching a pilot to make it easier and faster to preserve affordable rural rental housing by changing rules for loan transfers and guarantees. This affects owners and residents of multifamily housing, especially those using Low Income Housing Tax Credits or guaranteed loans. The pilot starts now and aims to cut red tape, speed up transfers, and protect these homes for the long haul. ## Abstract The Rural Housing Service (RHS or the Agency) of the United States Department of Agriculture (USDA) issues this notice to implement two related actions. The first action is the Multifamily Housing (MFH) Preservation Pilot (the Pilot). This action has 3 parts: MFH Rural Rental Housing Loan (MFH Section 515) and MFH Section 538 Guaranteed Rural Rental Housing Program (MFH Section 538) programmatic variations involving transfers; MFH Section 515 transfers utilizing Low Income Housing Tax Credits (LIHTC); and Variations specific to MFH Section 538 for the First 200 Transactions. The transfers for above address three types of preservation related transfers: MFH Section 515 ownership transfers that do not fall within the Simple Transfer Pilot; MFH Section 515 ownership transfers involving Low Income Housing Tax Credits (LIHTC); and MFH Section 538 transactions regardless of whether a transfer is involved up to the first 200 guaranteed loans. In addition to both the MFH 515 and MFH 538 programmatic changes and transfer changes, the Agency includes a DSCR change for the MFH 538 program, among other variations to that program, for the first 200 guaranteed loans in the Pilot. The Agency will use the Pilot to determine if it can improve program delivery efficiency for transactions that facilitate preservation of the low-income housing units in rural America while maintaining appropriate risk management of the portfolio. While the Pilot is active, the Agency will evaluate the Pilot's progress and identify opportunities to improve regulations, remove regulatory barriers, and reduce duplicative application requirements. These specific actions are critical for preserving assets in the MFH portfolio, which are aging and face significant delays and regulatory hurdles for transfers that significantly impact the assets long-term viability and overall portfolio risk; not only to the Agency but especially to the Rural population who reside in these assets. Therefore, for all parties involved, the Agency takes immediate action to ensure the Agency, owners and residents do not continue to struggle with the weight of government regulations slowing preservation of affordable, decent, safe and sanitary rural rental housing. The second action is Multifamily Housing Guaranteed Loan Notice of Loan-to-Cost Percentage Change. This action addresses a change to the loan terms for the MFH Section 538 Guaranteed Rural Rental Housing Program (MFH Section 538) under Option 3 (Continuous Guarantee) only. This action is not a part of the Pilot. Specifically, this action changes the maximum loan-to-cost percentage for loans guaranteed under Option Three (Continuous Guarantee) from 70 percent to 80 percent. The Agency is aligning with other federal agencies and the market to ensure demand for the guaranteed loans used for preservation and production of affordable, decent, safe and sanitary rural rental housing. ## Effects PRIA read - Higher Guaranteed Loan-to-Cost Limit: benefit, high. For MFH Section 538 Option 3 (Continuous Guarantee) loans, the Agency raises the maximum loan-to-cost ratio from 70 percent to 80 percent or less of total development cost. This change is a standing program change (not part of the Pilot) and is intended to increase preservation and production appli… - Lower DSCR for First 200 Guarantees: benefit, high. For the first 200 MFH Section 538 guaranteed loans closed under the Pilot, the Agency lowers the required debt service coverage ratio (DSCR) to 1.11, and may approve an even lower DSCR based on lender analysis of market conditions. - Appraisal Requirement Flexibility: benefit, medium. During the Pilot, the Agency may skip the Agency technical review of appraisals and will not require an appraisal for transfers when the Agency holds first lien and the total loans the transferee assumes equal 50 percent or less of the property's current value (per tax records or approved documenta… - Streamlined Low-Risk Transfer Processing: benefit, medium. The Agency may delegate processing of low-risk transfer applications to qualified lenders, nonprofit preservation partners, or other approved participants using Agency-approved templates and checklists, while retaining final approval authority. The Agency may suspend or revoke this authority for pe… - Accept HUD Environmental and CNA Documents: benefit, medium. For Pilot properties that also receive HUD financing or subsidy, the Agency may accept recent HUD environmental reviews, capital needs assessments (CNA), or related third-party reports to satisfy overlapping MFH program requirements, possibly with supplemental documentation as needed. - Allow Using Section 515 Loans to Buy Properties: benefit, medium. The Agency may allow borrowers to use MFH Section 515 subsequent loans to purchase a property as part of a transfer, treating such acquisition as an eligible use under 7 CFR 3560.73(a) when the transfer supports the Agency's affordable housing mission. - Distressed Property Preservation Track: benefit, high. The Agency may designate properties as distressed or at risk and prioritize those transfers with accelerated review, expanded preservation tools, and modified documentation requirements to facilitate transfer and long-term preservation of affordable units. - Developer Fee Rules Changed for LIHTC Transfers: mixed, medium. For MFH Section 515 transfers using Low Income Housing Tax Credits (LIHTC) during the Pilot, the Agency will allow the developer fee up to the maximum permitted by the State Housing Finance Agency's Qualified Allocation Plan (QAP) or a lower maximum required by other Federal or State funding source… - Relaxed ROI and Reserve Requirements for 515 Transfers: benefit, medium. For MFH Section 515 transfers in the Pilot, the Agency will not apply the additional ROI standards in 7 CFR 3560.68(a) and (b) and will instead follow 7 CFR 3560.68(c) provided resulting rents do not exceed Conventional Rents for Comparable Units (CRCU). The Agency may also accept alternate Capital… ## Related documents - [2026-06173](https://policyrisk.com/federal-register/2026-06173): Single Family Housing Guaranteed Loan Program-Income Producing Accessory Dwelling Unit (ADU) Provisions, 2026-03-31 - [2026-05387](https://policyrisk.com/federal-register/2026-05387): Single Family Housing Guaranteed Loan Program, 2026-03-19 - [2026-20022](https://policyrisk.com/federal-register/2026-20022): Revised Fee Structure for Section 538 Guaranteed Rural Rental Housing Program Initial and Annual Guarantee Fees, 2026-09-30 - [2026-16914](https://policyrisk.com/federal-register/2026-16914): Rescission of Rural Development's Construction and Repair Regulation, 2026-08-19 - [2026-13455](https://policyrisk.com/federal-register/2026-13455): Direct Multifamily Housing Subsequent Loans for Acquisition, 2026-07-02 - [2026-13397](https://policyrisk.com/federal-register/2026-13397): Notice of Recission of Funding Opportunity for the Rural Community Development Initiative (RCDI) for Fiscal Year 2025, 2026-07-02 ## Sources - [2026-19659 on federalregister.gov](https://www.federalregister.gov/documents/2026/09/25/2026-19659/multifamily-housing-preservation-pilot-and-multifamily-housing-guaranteed-loan-notice-of) - [2026-19659 as published (PDF)](https://www.govinfo.gov/content/pkg/FR-2026-09-25/pdf/2026-19659.pdf) ## Related - [Previous: 2026-19655, Jeffrey Thies: Final Debarment Order](https://policyrisk.com/federal-register/2026-19655) - [Next: 2026-19660, Reauthorization of the Biosimilar User Fee Act; Public Meeting; Request for Com…](https://policyrisk.com/federal-register/2026-19660) - [All Federal Register documents](https://policyrisk.com/federal-register) Source: PRIA, https://policyrisk.com/federal-register/2026-19659 (as of 2026-10-02).