S. 1260 — Rural Housing Service Reform Act of 2025

This section amends the Multifamily Mortgage Foreclosure Act of 1981 (12 U.S.C. 3702(2)) to expand the definition of multifamily mortgage to include those held by the Secretary of Agriculture under sections 514, 515, or 538 of the Housing Act of 1949 (42 U.S.C. 1484, 1485, 1490p)—programs that provide direct loans for farmworker and rural rental housing (secs. 514, 515) or loan guarantees for multifamily rural rental housing (sec. 538). (Thus, such mortgages become subject to the Act's uniform federal judicial foreclosure procedures previously limited to HUD-held mortgages.) It further amends section 521(d) of the Housing Act of 1949 (42 U.S.C. 1490a(d)) to require the Secretary, in managing, disposing of, or foreclosing on multifamily properties with attached rental assistance payments (i.e., subsidies for low-income tenants in USDA rural rental housing), to maintain those payments for affected dwelling units and to permit use of the contract for assistance to existing projects under sections 514, 515, or 516.

This section directs the Secretary of Agriculture, not later than 6 months after enactment, to conduct a study and submit to Congress a publicly available report on subsidies provided under section 521 of the Housing Act of 1949 (i.e., payment subsidies that reduce interest rates on section 502 direct loans for low- and moderate-income families to purchase, repair, or build housing in rural areas). The report must include (1) the total amount of such subsidies provided to section 502 borrowers, (2) the amount of those subsidies recaptured upon loan payoff or property transfer, and (3) the time and costs associated with recapturing those subsidies.

This section authorizes appropriations to the Secretary of Agriculture, for each of FY2026 through FY2030, such sums as necessary for increased staffing and information technology upgrades to support all Rural Housing Service programs. (The Rural Housing Service administers USDA housing programs for rural residents, including direct and guaranteed loans for homeownership and rental assistance.)

This section authorizes appropriations to the Secretary of Agriculture for FY2026, to remain available until five years after appropriation, for improvements to the technology of the Rural Housing Service used to process and manage housing loans. The Secretary must complete the improvements within five years of appropriation.

This section establishes a housing preservation and revitalization program for multifamily rental housing projects financed under sections 514 (farm labor housing loans), 515 (rural rental housing loans), or 516 (farm labor housing grants) of the Housing Act of 1949. (As background, these USDA Rural Housing Service programs provide affordable housing for low-income rural residents and farmworkers, many with maturing loans and expiring rental assistance that risks loss of affordability.) The program requires the Secretary to (1) annually notify owners of maturing loans (within four years) of options to extend loan terms or decouple rental assistance; (2) notify tenants, at least two years before maturity, of loan status, potential property actions, and rights to remain in assisted housing or obtain vouchers (in plain language and translated as needed); (3) restructure loans as needed to ensure project viability, including by reducing or eliminating interest, deferring payments, subordinating or reamortizing debt, providing incentives or advances, or removing units from income restrictions due to sustained vacancies; and (4) renew rental assistance contracts under section 521(a)(2) for the shorter of 20 years or the restructured loan term (subject to annual appropriations), if owners maintain decent, safe, and sanitary standards, with additional assistance for unassisted units as needed. For projects where restructuring is infeasible, the Secretary may renew section 521 rental assistance for 20 years (subject to annual appropriations), decoupled from borrower status. All preservation agreements require recorded restrictive use agreements obligating affordability, with terms matching the restructured loan or the longer of 20 years or remaining loan term if rental assistance is extended 20 years (terminable early if assistance ends for reasons beyond owner control).

This section modifies rental assistance contract authority under Section 521(d) of the Housing Act of 1949 for projects financed under sections 514 (farm labor housing loans), 515 (rural rental housing loans), or 516 (farm labor housing grants) of that Act, which provide subsidized rents for low-income elderly persons and families in rural areas. Specifically, it (1) authorizes the Secretary, upon owner request, to renew such contracts for up to 20 years or the loan term, whichever is shorter, subject to appropriations; (2) changes a requirement in paragraph (2) from mandatory ("shall") to permissive ("may"); and (3) directs that contract authority freed up by termination of assistance for a family be available first, at owner option, for up to 6 months to assist eligible unassisted families in the same project (i.e., current residents or new occupants), with any remainder used for eligible families in other such projects.

This section establishes a Native community development financial institution (Native CDFI) relending program as new subsection (j) of section 502 of the Housing Act of 1949 (42 U.S.C. 1472), which authorizes USDA Rural Development to make direct loans to low- and very low-income households in eligible rural areas to purchase, build, or repair single-family homes. (As background, Native CDFIs are Treasury-certified community development financial institutions that are at least 51% owned or controlled by, and direct at least 51% of activities toward serving, Indian Tribes, Alaska Native communities, or Native Hawaiian communities.) Of amounts appropriated annually for section 502 direct loans, the Secretary may use up to $50 million to make direct loans to Native CDFIs, which must (1) demonstrate capacity to provide a 20% non-Federal match (waived for loans to borrowers on priority Tribal lands, i.e., reservations, trust lands, Hawaiian Home Lands, Alaska Native regions, and certain other designated areas) and to originate and service single-family home loans; (2) use the funds to make section 502-eligible loans to borrowers who are members of Indian Tribes, Alaska Native communities, or Native Hawaiian communities (or households with such members), prioritizing those residing on priority Tribal lands; and (3) submit annual reports to the Secretary on outreach, leveraging, loan applications and deployments, average loan sizes, and loans on or off Tribal/priority lands. The Secretary must submit annual reports to specified congressional committees beginning one year after enactment.

This section modifies the Section 504 rural home repair program (i.e., loans and grants by USDA Rural Housing Service to repair, improve, or modernize rural dwellings for very low-income homeowners, making them safe and sanitary) by (1) authorizing loans to eligible low-income applicants (previously limited to very low-income applicants), (2) requiring that not less than 60% of loan funds be reserved for very low-income applicants, and (3) increasing from $7,500 to $15,000 the maximum loan amount that need be evidenced only by a promissory note.

This section establishes the Rural Community Development Initiative, under which the Secretary of Agriculture provides grants of up to $250,000 to eligible intermediaries (i.e., qualified private nonprofit or public organizations) for financial and technical assistance to eligible entities (i.e., private nonprofit community-based housing or community development organizations, rural communities, or federally recognized Indian tribes) to support housing, community facilities, and community and economic development projects in rural areas. Grants require matching funds from other sources (including federal funds for related activities) equal to the grant amount, which the Secretary may waive for projects in persistently poor rural regions.

This section establishes an annual reporting requirement for the Secretary of Agriculture on rural housing programs under Title V of the Housing Act of 1949 (i.e., Rural Housing Service programs that provide loans, grants, and assistance for homeownership, repairs, and rental housing in eligible rural areas). The report, submitted to the appropriate congressional committees and published on the Department of Agriculture website, must include (1) sortable raw data on loan performance by program and region; (2) information on program housing stock and reasons for properties ending participation (e.g., maturation, prepayment, foreclosure, or other servicing issues); and (3) risk ratings for assisted properties (with data aggregated or anonymized to protect participant privacy).

This section directs the Comptroller General of the United States to submit to Congress, not later than one year after the date of enactment of this Act, a report on the Rural Housing Service's (RHS's) outdated technology that includes (1) an analysis of its impacts on participants in RHS programs, (2) an estimate of funding needed to modernize that technology, and (3) an estimate of the number and type of new employees RHS needs for modernization. (RHS, within USDA, administers housing loans, grants, and guarantees for rural homeowners and renters.)

This section directs the Secretary of Agriculture, not later than two years after enactment, to issue regulations establishing a process to adjust rural housing voucher amounts under the rural housing voucher program (42 U.S.C. 1490r)—which assists very low-income families and persons residing in rural rental housing—following interim or annual reviews. The process includes (1) interim reviews, at tenant request, to recalculate amounts due to income reductions, changes in family composition, or rental rates; (2) annual reviews requiring tenants to recertify family composition and income not exceeding 80% of area median income, with consideration of extenuating circumstances for late recertification; and (3) completion of reviews and updates not later than 60 days before voucher term end, with updated amounts effective the first day of the month following voucher expiration.

This section establishes eligibility for rural housing vouchers for low-income households (including those not receiving rental assistance) in properties financed by USDA section 514 or 515 loans or section 516 grants (i.e., farm labor and rural rental housing for low-income families, elderly, disabled, and farmworkers) that have been prepaid (with or without restrictions), foreclosed, or had mortgages mature after September 30, 2005. The Secretary may provide such vouchers to households residing in the property for a term longer than the remaining lease term in effect on the date of prepayment, foreclosure, or maturity. (Thus, the provision expands tenant protections in aging or prepaid rural affordable housing projects.)

This section requires monthly assistance payments for rural housing vouchers under section 542 of the Housing Act of 1949 (42 U.S.C. 1490r)—which assist very low-income families and persons to rent in rural areas using a fair market rent-based payment standard—to be calculated as specified in subsection (a) of that section (i.e., payment standard minus 30% of the family's monthly adjusted income, not to exceed rent—including utilities—minus 10% of the family's monthly gross income), notwithstanding any other law, and mandates interim and annual reviews of the voucher amount upon changes in household composition, income, or rent.

This section amends section 515 of the Housing Act of 1949, which authorizes USDA direct loans and loan guarantees to finance multifamily rental and cooperative housing for low- and moderate-income families, the elderly, and persons with disabilities in rural areas, by (1) adding subsection (h)(3) to authorize nonprofit or public body purchasers—including a limited partnership with a general partner whose principal purpose is providing affordable housing—to purchase an appraised property without addressing rehabilitation needs at the time of purchase, if the purchaser commits to addressing those needs during ownership and accepts long-term use restrictions; and (2) in subsection (w)(1), increasing the specified percentage to 50 percent (from 9 percent).

This section authorizes the Secretary of Agriculture to refinance or modify the period of any section 502 rural housing loan (i.e., direct loans to low- and very low-income households to purchase, repair, build, or relocate a home in eligible rural areas), including previously refinanced loans, in accordance with terms prescribed by the Secretary, provided the total term from the date of refinance or modification does not exceed 40 years (previously up to 33 years base term plus up to 5-year extension for low-income borrowers). The authority applies to loans made before, on, or after enactment.

This section relieves the original borrower of liability for a guaranteed loan under section 502 of the Housing Act of 1949 (i.e., loans guaranteed by USDA Rural Development to private lenders for low- and moderate-income households to purchase, build, repair, or improve single-family homes in eligible rural areas) upon transfer of the property and assumption of the loan by an approved eligible borrower.

This section directs the Secretary of Agriculture to revise 7 CFR 3555.102(c)—which restricts USDA Single Family Housing Guaranteed Loan Program eligibility for certain home-based businesses—to exclude (1) a home-based business that is a licensed, registered, or regulated child care provider under State law or by a Tribal organization (as defined in the Child Care and Development Block Grant Act of 1990) and (2) an applicant that has applied to become such a provider.

This section revises the single-family dwelling requirement in Section 502(h)(4) of the Housing Act of 1949 for guaranteed loans in the rural single-family housing program (i.e., credit guarantees to private lenders for low- and moderate-income homebuyers in eligible rural areas). It (1) defines an accessory dwelling unit as a habitable living unit with separate ingress and egress that is subordinate in size, added to/within/detached from a primary single-family dwelling, and together constituting a single real estate interest; (2) clarifies that properties with such units satisfy the single-family requirement; and (3) states that nothing prohibits leasing an accessory dwelling unit or using its rental income to qualify for a loan guarantee after enactment of the Rural Housing Service Reform Act of 2025 if the property was constructed before enactment.

This section expresses the sense of Congress that the Secretary of Agriculture, not later than 90 days after receiving an application for a loan, grant, or combined loan and grant under section 502 (rural housing loans) or 504 (repair loans and grants) of the Housing Act of 1949, should review the application, complete underwriting, determine eligibility, and notify the applicant of the determination. The section further directs the Secretary to submit to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services, not later than 90 days after enactment of this Act and annually thereafter until all such eligibility determinations have been provided within 90 days throughout the preceding five-year period, a report detailing the timeliness of determinations under those sections—including justifications for any exceeding 90 days—and recommendations to ensure all determinations are completed within 90 days.