USDA Proposes to Make "Income Banding" Permanent

In a Federal Register notice published August 31, 2018, USDA’s Rural Housing Service proposed changes to its single-family direct and guaranteed loan and grant programs (Section 502 direct, 502 guaranteed, and 504 loans and grants), including making “income banding” a permanent part of the program regulations. Comments are due October 30, 2018.

The proposed changes are:

(1) Revising the definition of very low-, low-, and moderate-income to allow for a two-tier income limit structure (also known as income banding) within the single family housing direct loan and grant programs.
(2) Clarifying that net family assets are not considered when calculating repayment income, and that net family assets exclude amounts in voluntary retirement accounts, tax advantaged college, health, or medical savings or spending accounts, and other amounts deemed by the Agency not to constitute net family assets.
(3) Revising the methodology used to determine the area loan limits to use a percentage(s), as determined by the
Agency, of the applicable local HUD section 203(b) limit.
(4) As a result of income banding, converting borrowers currently receiving payment assistance method 1 to payment assistance method 2 should they receive a subsequent loan.
(5) Revising the definition of low-income to allow for the two-tier income limit structure (income banding) within the single family housing guaranteed loan program.