Written By: Frankie Lacy, Op-Ed Writer
Effective September 1, 2014, USDA will replace the 7 CFR 1980-D regulations with the 7 CFR 3555 regulations for its guaranteed rural housing program. The new handbook will house all previous administrative notices (AN’s) and the existing rules in one comprehensive document. The new handbook will also include all rule changes based on regulation 7 CFR 3555.
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All loan applications received by USDA on or after September 1, including applications released in GUS (USDA’s automated underwriting engine) are subject to the rules in the new handbook. In addition, the RD 1980-21 and Attachment A will be replaced by the Rd 3555-21 which combines the application and the household income worksheet into one document.
Below are some highlights of the new rules:
-Lender eligibility has been expanded to include entities supervised and regulated by several government agencies to expand program availability to small rural lenders.
-The land total value limitation of 30% and the in-ground pool restrictions have been removed.
-The credit review process will now be streamlined to qualify based on a validated credit score rather than individual credit indicators.
-Interior repair escrow criteria are introduced for transactions where repairs cannot be completed prior to close.
-The 180 documentation expiration rule for new construction loans has been eliminated. All documents must be within 120 days.
In addition, USDA has set new rural area maps that will take effect October 1, 2014. USDA has also issued a new annual fee structure that is effective October 1st. Instead of the current .04% of the unpaid principle, the new annual fee on refinance and purchase transactions will be based on .05% of the unpaid principle balance. Again, all applications submitted to USDA or released in GUS on or after October 1st will be subject to the new eligibility areas and annual fee structure.
As a result of these effective dates, USDA has issued communication cautioning lenders to be extremely careful prior to the final GUS submission for the conditional commitment request. Loans that do not meet the new eligibility requirements or that are outside the new map boundaries and fee structure will not be approvable after the effective dates outlined above. For loan centers that are a bit further out on loan review turn times, I recommend that any outdated documentation be updated to as recent a date as possible to avoid GUS release requests.
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The new handbook, forms, and training material can be found at:https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do
About The Author
Frankie Lacy - As an op-ed writer, Ms. Frankie Lacy is a 15+ year mortgage industry veteran with extensive conventional mortgage underwriting experience. Topics of Frankie's expertise include: Fannie Mae, Freddie Mac, USDA Rural Housing, underwriting to investor overlays, self-employed borrowers, personal and business tax return analysis, rental income, condos/co-ops/PUDs, and more. Frankie is a Davenport University graduate with a degree in Business Administration.
