Final 7 CFR Part 3555 and HB Revisions ORIGINATION

Transcription

1 Final 7 CFR Part 3555 and HB Revisions ORIGINATION Single Family Housing Guaranteed Loan Program March Guaranteed Loan Program Regulation 7 CFR Part 3555 Interim final rule effective December 1, 2014 Final Rule Published: Federal Register February 8, 2016 Final Rule Effective: March 9,

2 7 CFR Part 3555 Subpart A: General.1: Applicability.2: Purpose.3: Civil Rights.4: Mediation and appeals.5: Environmental Requirements.6: State and local law.7: Exception authority.8: Conflict of interest.9: Enforcement.10: Definitions and abbreviations 3 7 CFR Part 3555 Subpart B: Lender Participation.51: Lender eligibility.52: Lender approval.53: Contracting for loan origination.54: Sale of loans to approved lenders 4 2

3 7 CFR Part 3555 Subpart C: Loan Requirements.101: Loan Purposes.102: Loan restrictions.103: Maximum loan amount.104: Loan terms.105: Combination construction and permanent loans.107: Application for and issuance of loan guarantee.108: Full faith and credit 5 7 CFR Part 3555 Subpart D: Underwriting the Applicant.151: Eligibility requirements.152: Calculation of income and assets 6 3

4 7 CFR Part 3555 Subpart E: Underwriting the Property.201: Site requirements.202: Dwelling requirements.203: Ownership requirements.204: Security requirements.205: Special requirements for condominiums.206: Special requirements for community land trusts.207: Special requirements for Planned Unit Developments (PUD s).208: Special requirements for manufactured homes.209: Rural Energy Plus loans 7 7 CFR Part 3555 Subpart F: Servicing Performing Loans.251: Servicing responsibility.252: Required servicing actions.253: Late payment charges.254: Final payments.255: Borrower actions requiring lender approval.256: Transfer and assumptions.257: Unauthorized assistance 8 4

5 7 CFR Part 3555 Subpart G: Servicing Non Performing Loans.301: General servicing techniques.302: Protective advances.303: Traditional servicing options.304: Special servicing options.305: Voluntary liquidation.306: Liquidation.307: Assistance in natural disasters 9 7 CFR Part 3555 Subpart H: Collecting on the Guarantee.351: Loan guarantee limits.352: Loss covered by the guarantee.353: Net recovery value.354: Loss claim procedures.355: Reducing or denying the claim.356: Future recovery 10 5

6 Guaranteed Loan Program Technical Handbook HB Revision Document: Distributed through GovDelivery February 22, 2016 Revised HB Published and Effective: March 9, HB Overview 2: Record Retention 3: Lender Approval 4: Lender Responsibilities 5: Origination and Underwriting Overview 6: Loan Purposes 7: Loan Terms and Conditions 8: Applicant Characteristics 9: Income Analysis 10: Credit Analysis 12 6

7 HB : Ratio Analysis 12: Property and Appraisal Requirements 13: Special Property Types 14: Funding Priorities 15: Submitting the Application Package 16: Closing the Loan and Requesting the Guarantee 17: Regular Servicing Performing Loans 18: Servicing Non Performing Loans 19: Custodial and Real Estate Owned Property 20: Loss Claims Collecting on the Guarantee 13 ORIGINATION REVISIONS Chapter 5: Origination and Underwriting Review thru Chapter 16: Closing the Loan and Requesting the Guarantee 14 7

8 TIPS Underwriter =USDA Approved Lender USDA = not an underwriter Research Rule & HB questions: Control + F Research HB questions: Table of Contents 15 7 CFR PART 3555 FINAL RULE REVISIONS 16 8

9 7 CFR Part 3555: Additional insurance options included. Clarification for existing dwellings: no need to consider alternatives 17 7 CFR Part 3555: Clarification for private flood insurance added 18 9

10 7 CFR Part 3555: Final added for LOMA/LOMR New dwellings in flood zones, if alternatives analysis performed: compliant with Agencies National Environmental Policy Act regulation 19 7 CFR Part 3555: Discount points may be financed for all applicants (low income only, removed) Regulation citations corrected 20 10

11 7 CFR Part 3555: Clarification added for principal balance of loan and exclusion of accrued interest Clarification added to refer to HB for additional guidance as applicable 21 7 CFR Part 3555: Regulation citation corrected 22 11

12 7 CFR Part 3555: Freddie Mac interest rate option removed 23 7 CFR Part 3555: Manufactured homes is removed as ineligible for the single close construction loan. Eligible site condos are eligible guarantee was removed after Annual 24 12

13 7 CFR Part 3555: Late charges attributed to payment of the annual fee due may NOT be passed to the borrower 25 7 CFR Part 3555: Clarification to revoke originating lender s eligibility added when the regulation is not met 26 13

14 7 CFR Part 3555: loan added Chapter 13 bankruptcy guidance added 27 7 CFR Part 3555: Regulation citation corrected 28 14

15 7 CFR PART 3555 / HB REVISIONS AND LEARNING CHECKS 29 Chapter 5: Origination and Underwriting Overview NEW: Omitted accounts require the Notes in GUS to be completed (5.3 F) NEW: Lenders should use electronic document delivery (5.3 J) NEW: GUS Credit Reports: If the report in GUS will exceed 120 days at loan closing, but a new report reveals no changes to credit, no resubmission/revision is required (5.3 M) 30 15

16 Chapter 5: Origination and Underwriting Overview Purchase Price: $175,000 What amount of eligible assets will indicate the household may qualify for conventional credit? A. $35,000 B. $35,000 plus closing costs/etc. 31 Chapter 5: Origination and Underwriting Overview ANSWER: 5.2 A B. $35,000 plus additional $$ for closings costs, etc. $175,000 x 20% = $35,000 Verify additional money for required costs Ensure applicant does not qualify for a conventional loan per current Fannie Mae and/or Freddie Mac guidelines 32 16

17 Chapter 5: Origination and Underwriting Overview Open authorized user account Credit supplement obtained outside of GUS documents this account as closed GUS Accept uw recommendation may be retained A. TRUE B. FALSE 33 Chapter 5: Origination and Underwriting Overview ANSWER: 5.2 A B. FALSE Credit report in GUS must be accurate GUS cannot accept supplement reports 34 17

18 Chapter 5: Origination and Underwriting Overview January: $1, February: $2, Correct asset entry for reserve calculation: A. $1, B. $2, Chapter 5: Origination and Underwriting Overview ANSWER: 5.3 E A. $1, Lessor of: Two month average balance or Current bank statement/recent VOD Inflated reserves = unsupported uw recommendation 36 18

19 Chapter 5: Origination and Underwriting Overview Which option is the correct way to omit a debt in GUS? A. B. C. 37 Chapter 5: Origination and Underwriting Overview ANSWER: 5.3 F B. Debt must be marked Omit Notes data field must be completed 38 19

20 Chapter 5: Origination and Underwriting Overview A complete Form RD includes the income worksheet. A. TRUE B. FALSE 39 Chapter 5: Origination and Underwriting Overview ANSWER: 5.3 J A. TRUE The income worksheet is part of Form RD Income Worksheet has been removed as a separate required item 40 20

21 Chapter 5: Origination and Underwriting Overview Lenders are encouraged to electronically upload origination and loan closing documents. A. TRUE B. FALSE 41 Chapter 5: Origination and Underwriting Overview ANSWER: 5.3 J A. TRUE Upload Documents in GUS Lender Loan Closing LLC System SAVE YOUR PAPER FOR GROCERY LISTS 42 21

22 Chapter 5: Origination and Underwriting Overview Credit report in GUS has exceeded 120 days (expired) Credit pulled outside of GUS verifies no changes Lender may retain current conditional commitment with the expired credit report in GUS. A. TRUE B. FALSE 43 Chapter 5: Origination and Underwriting Overview ANSWER: 5.3 M A. TRUE No changes = issued conditional commitment is valid New credit/adverse impact = resubmit 44 22

23 Chapter 6: Loan Purposes NEW: Discount points may be financed for all applicants (6.3) 45 Chapter 6: Loan Purposes Discount points may be financed for all applicants. A. TRUE B. FALSE 46 23

24 Chapter 6: Loan Purposes ANSWER: 6.3 A. TRUE No longer restricted to only low income applicants Eligible loan purpose up to maximum loan amount per Chapter 6: Loan Purposes USDA has internal thresholds for lender points, fees, and charges. A. TRUE B. FALSE 48 24

25 Chapter 6: Loan Purposes ANSWER: 6.2 C B. FALSE USDA requires lenders to follow Federal and State laws CFPB publishes guidelines 49 Chapter 8: Applicant Characteristics Manufactured home units not on permanent foundations are considered functionally inadequate (8.2 A) Overcrowding room count: Do not include bathrooms or entry hall/foyer (8.2 A) 50 25

26 Chapter 8: Applicant Characteristics Tradeline and adverse credit requirements removed from conventional credit qualifications (8.2 B) NEW: Educational savings plans/529 Plans are not considered for conventional credit asset qualification (8.2 B) 51 Chapter 8: Applicant Characteristics Military applicant occupancy: Discharge requirement within one year removed (8.2 C) Lender databases that utilize SAM are acceptable (8.2 E) 52 26

27 Chapter 8: Applicant Characteristics Which manufactured home is functionally inadequate? A. B. 53 Chapter 8: Applicant Characteristics ANSWER: 8.2 A B. Not on permanent foundation May be retained Include applicable debts in ratios 54 27

28 Chapter 8: Applicant Characteristics Which of these assets are not considered for conventional credit eligibility? A. Checking B. Savings C. 529 College Savings Plans D. Money Market Checking E. Lot/Land Owned F. IRA Retirement Plan 55 Chapter 8: Applicant Characteristics ANSWER: 8.2 B C. 529 College Savings Plans E. Lot/Land Owned F. IRA Retirement Plan Assets must be liquid and available without penalty 56 28

29 Chapter 8: Applicant Characteristics Are these active duty military applicants eligible? A. Currently deployed, family will reside in home within 90 days of loan closing B. Currently enlisted, more than one year remaining in service, will reside in home within 90 days of loan closing C. Currently deployed, no occupancy or family to reside in home within 90 days of loan closing 57 Chapter 8: Applicant Characteristics ANSWER: 8.2 B A. Eligible B. Eligible C. Ineligible No requirement on discharge date Occupancy must be made within 90 days of loan closing by applicant and/or family 58 29

30 Chapter 9: Income Analysis HB 9.3 A: Income sources not included in annual income listed in Attachment 9 C have been moved into HB chapter sections 59 Chapter 9: Income Analysis HB 9.3 B: Projecting annual income: Income sources considered for annual income, from all adult household members: NEW: Documented pay raise/cost of living increase to occur on or prior to loan approval, must be included NEW: Income of spouse unless living apart for 3 months (other than military/work) and no legal proceedings filed for divorce/legal separation 60 30

31 Chapter 9: Income Analysis NEW: Gift funds via wire transfer: settlement agent must receive the funds from the donor(9.3 E 1) NEW: IRS Transcripts: Accuracy of income and tax documentation, SSN, and combat mtg. fraud (9.3 E 6) NEW: IRS Transcripts: Discrepancies between applicant documentation and IRS information must be documented in the lender file (9.3 E 6) 61 Chapter 9: Income Analysis NEW: IRS Transcripts (9.3 E 6) Look familiar? ListServe:

32 Chapter 9: Income Analysis NEW: Social Security is considered to continue unless the benefit/award letter specifically states an expiration date (9.10 A 6) NEW: Never used for repayment: Payments for the care of foster children/adults: (9.12) 63 Chapter 9: Income Analysis Kelly has been employed at Techno for 3 years. The employer VOE documents a pay raise will occur prior to loan approval. The pending raise must be included in annual income A. TRUE B. FALSE 64 32

33 Chapter 9: Income Analysis ANSWER: 9.3 B A. TRUE Documented pay raises that will be effective prior to loan approval must be calculated into annual income Loan approval = USDA issues conditional commitment 65 Chapter 9: Income Analysis Stan and Fran are married. Fran moved out two months ago and filed for divorce. Stan is applying for a guaranteed loan. Does Fran s income have to be included for annual income eligibility? 66 33

34 Chapter 9: Income Analysis ANSWER: 9.3 B NO Separated less than 3 months Legal action for divorce has been filed 67 Chapter 9: Income Analysis Pat and Carol are married. Pat is deployed for two years. Carol is applying for a guaranteed loan as a sole applicant. Does Pat s income have to be included for annual income eligibility? 68 34

35 Chapter 9: Income Analysis ANSWER: 9.3 B YES Separated due to work and/or military assignment Pat continues to be part of the household 69 Chapter 9: Income Analysis Steve and Jody are married. Steve moved out two months ago. No one has filed for divorce/legal separation. Jody is applying for a guaranteed loan. Does Steve s income have to be included for annual income eligibility? 70 35

36 Chapter 9: Income Analysis ANSWER: 9.3 B YES Separated less than 3 months No legal action has been filed for separation/divorce 71 Chapter 9: Income Analysis Joe has annual income of $125,000. He has a business loss of $45,000. Joe s adjusted annual income with consideration of the business loss is: A. $80,000 B. $125,

37 Chapter 9: Income Analysis ANSWER: 9.3 B and 9.3 E 1 B. $125,000 Business losses are treated as zero for annual income Business losses are deducted from repayment income (9.10 C 1) 73 Chapter 9: Income Analysis Keith is a truck driver, his annual income is $65,000. His IRS 2106 reflects total unreimbursed business expenses of $12,500. Keith s adjusted annual income with consideration of the unreimbursed expenses is: A. $52,500 B. $65,

38 Chapter 9: Income Analysis ANSWER: 9.3 B A. $52,500 Unreimbursed expenses on IRS Form 2106 may be deducted from annual income Unreimbursed expenses on IRS Form 2106 must be deducted from repayment income (9.10 A 19) 75 Chapter 9: Income Analysis Missy is a Pampered Chef sales professional, annual income is $85,000 Tax returns reflect eligible deductions for mortgage interest/taxes/insurance of $13,500 Missy s adjusted annual income with consideration of these deductions is: A. $85,000 B. $71,

39 Chapter 9: Income Analysis ANSWER: 9.3 B A. $85,000 Home based operation related expenses such as mortgage interest/taxes/insurance are not deducted from annual income Depreciation claimed for business use of home on tax returns is eligible for repayment income 77 Chapter 9: Income Analysis Checking: $2,500 Savings: $1,000 (earns 1.25% annually) What amount of income must be added to annual income: A. $15.50 B. $

40 Chapter 9: Income Analysis ANSWER: 9.3 B B. $0 Assets are below $5, Chapter 9: Income Analysis Checking: $12,500 (non interest bearing) Savings: $1,500 (earns.85% annually) What amount of income must be added to annual income: A. $31.25 B. $

41 Chapter 9: Income Analysis ANSWER: 9.3 B B. $44 Assets are $5,000 or greater Include the greater of actual income earned or calculation based on a passbook savings rate $12,500 x.25% (passbook)= $31.25 $1,500 x.85% = $12.75 $ $12.75 = $44 81 Chapter 9: Income Analysis Assets must be listed on the 1003 and/or the Asset and Liability GUS application page A. TRUE B. FALSE 82 41

42 Chapter 9: Income Analysis ANSWER: 9.3 E 1 B. FALSE Assets do not have to listed on the 1003 or in GUS Income from assets that meets the requirements in 9.3 B must be included in annual income 83 Chapter 9: Income Analysis Jennifer was awarded in court $600 monthly child support in January 2014 Payments were received for 6 months and ceased after June 2014 The child support must be counted in annual income A. TRUE B. FALSE 84 42

43 Chapter 9: Income Analysis ANSWER: 9.3 B B. FALSE Documentation of non payment and legal actions to collect: the amount is not included in annual income Income that is not stable and dependable cannot be used for repayment income 85 Chapter 9: Income Analysis Patrick has received SSI disability for previous 3 years Benefit statement has no expiration date/continuance The SSI is eligible for repayment income A. TRUE B. FALSE 86 43

44 Chapter 9: Income Analysis ANSWER: 9.10 A 6 A. TRUE Over 2 year history of receipt Statement does not list expiration of benefit, lender may assume continuance 87 Chapter 9: Income Analysis Foster care payments for children and/or adults can be used for repayment. A. TRUE B. FALSE 88 44

45 Chapter 9: Income Analysis ANSWER: 9.12 B. FALSE Not a stable and dependable income source 89 Chapter 10: Credit Analysis NEW: Two tradelines open for 12 months are required to validate the credit score for underwriting (10.5) NEW: Examples of eligible and ineligible tradelines are listed (10.5) NEW: Authorized user accounts may be used to validate the score if the applicant has made the payments for the previous 12 months (10.5) 90 45

46 Chapter 10: Credit Analysis NEW: Nontraditional credit: Two nontradelines open for 12 months (one must be rent). No rent = three nontraditional tradelines required) (10.6) NEW: Nontraditional tradelines do not have to be open to be eligible (10.6) NEW: Nontraditional tradelines must be recent: closed no more than 6 months at the time of loan application (10.6) 91 Chapter 10: Credit Analysis NEW: Insurance premiums paid quarterly or annually may indicate full 12 months history of payment (10.6) NEW: Guidance is provided individually for GUS Accept loans and manually underwritten loans: Credit Scores (10.7), Collections (10.9), Disputed Accounts (10.11), Authorized User Accounts (10.12), Rent History (10.13), Payment Shock (10.14), and Attachment 10 B 92 46

47 Chapter 10: Credit Analysis NEW: GUS Accept downgrade guidance (10.7 B) NEW: Pre foreclosure sale within 3 years of request for conditional commitment: if due to divorce and payment current at time of divorce, applicant may be eligible (Att. 10 B) NEW: Terminated authorized user account = closed account (10.12) Credit supplements obtained outside of GUS are ineligible to retain a GUS Accept (Att. 10 B) 93 Chapter 10: Credit Analysis NEW: Delinquent Federal Tax Debt section (Att. 10 B) NEW: Completed Chapter 13 BK section (Att. 10 B) No credit exception if completed 12 months prior to loan application (manual uw). GUS Accept = No exception required NEW: Charge off account section (Att. 10 B) Manually uw loans with scores of 640 and below require credit exception. GUS Accept = No exception required 94 47

48 Chapter 10: Credit Analysis NEW: Delinquent Federal Tax Debt section (Att. 10 B) NEW: Completed Chapter 13 BK section (Att. 10 B) No credit exception if completed 12 months prior to loan application (manual uw). GUS Accept = No exception required NEW: Charge off account section (Att. 10 B) Manually uw loans with scores of 640 and below require credit exception. GUS Accept = No exception required 95 Chapter 10: Credit Analysis GUS will validate the credit score used for the underwriting recommendation. A. TRUE B. FALSE 96 48

49 Chapter 10: Credit Analysis ANSWER: 10.1, 10.5 B. FALSE GUS does not dynamically validate the credit score A human must do so 97 Chapter 10: Credit Analysis A validated credit score indicates an acceptable credit history. A. TRUE B. FALSE 98 49

50 Chapter 10: Credit Analysis ANSWER: 10.5 B. FALSE Validated score = sufficient credit history to support score Indicates the file is not thin credit 99 Chapter 10: Credit Analysis Applicant A: 720 Applicant B: 640 These scores are high enough and do not require validation. A. TRUE B. FALSE

51 Chapter 10: Credit Analysis ANSWER: 10.5 B. FALSE All scores must be validated Minimum tradelines/time open required 101 Chapter 10: Credit Analysis Target Red Card: 6 months Auto Loan: 24 months Visa: 13 months MasterCard: 16 months Is 10.5 met? A. YES B. NO

52 Chapter 10: Credit Analysis ANSWER: 10.5 A. YES Two tradelines Open with repayment for 12 months 103 Chapter 10: Credit Analysis Tradelines on the credit report must be open with a recent payment history to meet 10.5 Closed accounts are not eligible A. TRUE B. FALSE

53 Chapter 10: Credit Analysis ANSWER: 10.5 B. FALSE Tradelines on the credit report may be open, closed, and/or paid in full 105 Chapter 10: Credit Analysis Target Red Card: 6 months Auto Loan: 2 months Visa: 13 months Student Loan: 36 months, deferred Is 10.5 met? A. YES B. NO

54 Chapter 10: Credit Analysis ANSWER: 10.5 B. NO There are not two eligible tradelines Deferred student loan has no repayment history Downgrade an Accept Supplement with VOR or two nontraditional tradelines 107 Chapter 10: Credit Analysis Target Red Card: 9 months Auto Loan: 36 months Student Loan: 48 months, deferred Visa: 56 months, authorized user Is 10.5 met? A. YES B. NO C. MAYBE

55 Chapter 10: Credit Analysis ANSWER: 10.5 C. MAYBE IF applicant has evidence they have made payments on AU account for last 12 months If no: Downgrade the Accept Supplement with VOR or two nontraditional tradelines 109 Chapter 10: Credit Analysis Nontraditional credit borrower VOR: 18 months Electricity Rocks: 18 months Mad Max cable: 16 months Is 10.6 met? A. YES B. NO

56 Chapter 10: Credit Analysis ANSWER: 10.6 A. YES VOR requires one more nontraditional tradeline No VOR? Three nontraditional tradelines required 111 Chapter 10: Credit Analysis Nontraditional credit borrower VOR: 12 months, lease ended 8 months ago Electricity Rocks: 18 months Mad Max cable: 16 months Is 10.6 met? A. YES B. NO

57 Chapter 10: Credit Analysis ANSWER: 10.6 B. NO VOR was closed more than 6 months at time of loan application Three nontraditional tradelines required, applicant needs one more (assuming electric bill and cable continue to be eligible) 113 Chapter 10: Credit Analysis IRS tax judgment, obtained in U.S. Tax Court No repayment plan Underwriter may approve exception A. TRUE B. FALSE

58 Chapter 10: Credit Analysis ANSWER: 10.7 A B. FALSE Federal U.S. Tax Court and non federal judgments are ineligible without a repayment plan and 3 timely payments Federal judgments open/unsatisfied = Ineligible 115 Chapter 10: Credit Analysis Bill: $75,600, credit score 662 Monica: $24,500, credit score 725 Who must be the primary applicant? A. Bill B. Monica

59 Chapter 10: Credit Analysis ANSWER: 10.7 A NEITHER It does not matter which applicant is primary and which is secondary 117 Chapter 10: Credit Analysis GUS Accept = loan approval Approved Lender underwriter cannot deny loan file A. TRUE B. FALSE

60 Chapter 10: Credit Analysis ANSWER: 10.7 B B. FALSE Data entry may be incorrect Data entered may not be supported with documentation 119 Chapter 10: Credit Analysis GUS may be downgraded due to: A cannot be met B. Debts manually entered are not on credit report C. Disputed account(s) do not meet D. Authorized user account(s) do not meet E. Credit report is inaccurate

61 Chapter 10: Credit Analysis ANSWER: 10.7 B A. E. ALL ARE CORRECT List is not all inclusive 121 Chapter 10: Credit Analysis USDA does not require consideration for medical collections A. TRUE B. FALSE

62 Chapter 10: Credit Analysis ANSWER: 10.9 B. FALSE Underwriters must consider all collections for acceptable credit reputation (a.k.a. ability/willingness to repay debts). Manual UW: Credit Exception to meet 10.8 and Attachment 10 B GUS Accept: UW rationale 123 Chapter 10: Credit Analysis Medical collections, charge off accounts and other collections are not required to be listed on the 1003 and/or GUS Asset and Liability application page. A. TRUE B. FALSE

63 Chapter 10: Credit Analysis ANSWER: 10.9 B. FALSE File must be accurately represented All open debts must be identified 125 Chapter 10: Credit Analysis A. $550 Legal Eagles B. $350 Mad Max Cable C. $400 Dr. Houser D. $200 Barnes Hospital E. $1500 X Ray Tech F. $700 Electricity Rocks G. $4500 EZ Auto Total = $8,200 $2,100 (medical) = $6,100 Which accounts require pay off, payment arrangement, or 5% of balance in ratios

64 Chapter 10: Credit Analysis ANSWER: 10.9 A. $550 Legal Eagles B. $350 Mad Max Cable C. $400 Dr. Houser D. $200 Barnes Hospital E. $1500 X Ray Tech F. $700 Electricity Rocks G. $4500 EZ Auto The total of these accounts exceeds $2,000 UW may: 1.) Require pay off, 2.) Include payment from an arrangement with creditor, or 3.) Include 5% of the balance in ratios 127 Chapter 10: Credit Analysis Non federal judgment: $1,850 Documented repayment agreement $100/month 5 months of repayment documented The applicant is eligible for a guaranteed loan A. TRUE B. FALSE

65 Chapter 10: Credit Analysis ANSWER: A. TRUE Non federal judgment Repayment plan in place 3 months of payments have been made prior to loan application 129 Chapter 10: Credit Analysis Disputed account: $250 Big TV Store Open 36 months A GUS Accept downgrade is not required A. TRUE B. FALSE

66 Chapter 10: Credit Analysis ANSWER: A. TRUE Balance less than $500 Over 24 months old 131 Chapter 10: Credit Analysis GUS Accept 700 middle credit score, validated per 10.5 A VOR is not required for rent entered on GUS Income and Expenses application page A. TRUE B. FALSE

67 Chapter 10: Credit Analysis ANSWER: A. TRUE Bonus Question: What if the Accept is downgraded, other than 10.5? VOR needed? Credit score is above 680, no VOR required 133 Chapter 10: Credit Analysis Chapter 7 bankruptcy discharged less than 36 months GUS cannot render an Accept recommendation A. TRUE B. FALSE

68 Chapter 10: Credit Analysis ANSWER: Attachment 10 B, Chapter 7 Bankruptcy B. FALSE GUS can render an Accept recommendation, per scorecard and internal rules engine Ensure Declarations are correct Manual UW: UW may grant exception if Minimum 12 months discharged Credit exception documented per Chapter 10: Credit Analysis Chapter 13 bankruptcy, in progress 8 months of payments verified GUS Accept recommendation A downgrade is required A. TRUE B. FALSE

69 Chapter 10: Credit Analysis ANSWER: Attachment 10 B, Chapter 13 Bankruptcy B. FALSE Scorecard has rendered recommendation No credit exception required Include payment in liabilities 137 Chapter 10: Credit Analysis Mike and Sara divorce final 10/2013 Sara awarded home, no refinance, late payments began 12/2014 Short Sale completed 6/2015 The Short Sale is adverse credit for Mike A. TRUE B. FALSE

70 Chapter 10: Credit Analysis ANSWER: Attachment 10 B, Short Sales B. FALSE Mortgage was current at the time of divorce Documentation must be retained for support 139 Chapter 11: Ratio Analysis NEW: 30 day accounts paid in full each month are not included in the debt ratio. Late payments = include the debt (11.2 B) NEW: Previous mortgage: Lender may retain divorce decree and payment history to exclude the debt (11.2 B) NEW: Judgment accounts with consistent repayment and less than 10 months remaining may be excluded from the debt ratio (11.2 B)

71 Chapter 11: Ratio Analysis NEW: Charge off accounts section added: not required to be included in debt ratios (11.2 B) NEW: Significant impact on repayment defined: 5% of gross monthly income (11.2 B) 141 Chapter 11: Ratio Analysis Mindy uses VISA credit card to pay $500 appraisal fee Lender must recalculate the monthly minimum credit card payment with this new debt added to the balance for ratio consideration A. TRUE B. FALSE

72 Chapter 11: Ratio Analysis ANSWER: 11.2 B B. FALSE The previous guidance to recalculate the debt when new charges are added is removed 143 Chapter 11: Ratio Analysis Target credit card has $250 balance Account is marked paid by close Target card must be closed after it is paid in full A. TRUE B. FALSE

73 Chapter 11: Ratio Analysis ANSWER: 11.2 B B. FALSE Revolving accounts marked paid by close are not required to be closed Lender retains evidence of zero balance/paid in full 145 Chapter 11: Ratio Analysis AMEX card has $400 balance Applicant pays full balance each month Lender must verify previous 12 months are all paid in full with no late payments to exclude this debt from ratios A. TRUE B. FALSE

74 Chapter 11: Ratio Analysis ANSWER: 11.2 B A. TRUE Late pays in last 12 months = include 5% of balance in ratios No history of paying in full = include 5% of balance in ratios 147 Chapter 11: Ratio Analysis Student Loans on credit report: A. Balance: $25,200 Payment: $25.00 IBR B. Balance: $10,500 Payment: $ Fixed C. Balance: $3,500 Payment: $54.24 Fixed Which student loan payment(s) is not eligible to be utilized in ratios?

75 Chapter 11: Ratio Analysis ANSWER: 11.2 B A. Balance: $25,300, IBR payment of $25 IBR payments are not fixed payments, subject to change, include 1% of balance on credit report in ratios Excessive obligations post loan closing are a risk Fixed payments may be verified through account statement as not subject to change 149 Chapter 11: Ratio Analysis John co signed Justin s car loan Justin provides 12 months bank statements to prove he has paid the debt The car loan may be excluded from John s ratios A. TRUE B. FALSE

76 Chapter 11: Ratio Analysis ANSWER: 11.2 B A. TRUE 12 months evidence from Justin proves John is not making the payments Late payments in last 12 months = count the debt Individual accounts = include the debt 151 Chapter 11: Ratio Analysis Non Federal Judgment Less than 10 months remains on repayment plan Underwriter considers payment is significant, may impact repayment of the mortgage Underwriter must exclude this payment from the ratios A. TRUE B. FALSE

77 Chapter 11: Ratio Analysis ANSWER: 11.2 B B. FALSE Underwriter discretion is final May be excluded with 10 months or less payments Late payments in last 12 months = count the debt 153 Chapter 11: Ratio Analysis Molly earns $2,500 per month (gross earnings) What percentage of her income represents a significant impact on repayment for a monthly debt amount? A. 15% B. 5%

78 Chapter 11: Ratio Analysis ANSWER: 11.2 B B. 5% (significant impact) $2500 x 5% = $150 Installment debts may be paid down to 10 months = eligible to exclude from ratios However, the UW determines if the debt payment is a risk and may include 155 Chapter 11: Ratio Analysis Tyler has a balloon loan No monthly payment Full debt of $5,000 is due in six months Which amount must be included in the debt ratios? A. $250 B. $

79 Chapter 11: Ratio Analysis ANSWER: 11.2 B A. $250 No actual payment known 5% of loan balance will be used for ratios 157 Chapter 12: Property and Appraisal Requirements NEW: USDA does not have to be listed as an intended user (12.5 B) NEW: Specific photograph requirements for the appraisal are listed (12.5 B) NEW: Property flipping guidance (12.5 B) NEW: Essential repairs to meet HUD Handbook MPR may be escrowed if the home is habitable (12.9 C)

80 Chapter 12: Property and Appraisal Requirements NEW: Repairs to roof, foundation, structure, electricity, plumbing, heat source, etc. may not be escrowed (12.9 C) NEW: USDA may allow extended timeframes up to 180 days for escrow completion (12.9 C) NEW: Remaining escrow funds from borrower may be returned to the borrower (12.9 C) 159 Chapter 12: Property and Appraisal Requirements NEW: Document need for new construction in flood zone/no alternatives (12.10 B) NEW: Dwellings in flood zones with private septic and wells require precautions to prevent well contamination (12.10 B) NEW: Manufactured homes and eligible site condominiums are eligible for the single close new construction loan (12.16)

81 Chapter 12: Property and Appraisal Requirements USDA must be named as an intended user on the appraisal report The Cost Approach must be completed on all appraisals A. TRUE B. FALSE 161 Chapter 12: Property and Appraisal Requirements ANSWER: 12.5 B B. FALSE No requirements for intended user or cost approach Cost approached revoked in ListServ: May 14, 2015 Cost approach may be completed at discretion of appraiser or request of lender

82 Chapter 12: Property and Appraisal Requirements Purchase agreement: $95,000 Property previously sold six months ago for $65,000 Lender is responsible to analyze appraisal, ensure report is complete, and question large increases/decreases in value A. TRUE B. FALSE 163 Chapter 12: Property and Appraisal Requirements ANSWER: 12.5 B A. TRUE Lenders must review appraisals Protect applicant from property flipping/predatory lending

83 Chapter 12: Property and Appraisal Requirements Existing dwelling has private well and septic Distance between well and septic meets county code, but not current HUD Handbook required distances Property is eligible for guaranteed loan consideration A. TRUE B. FALSE 165 Chapter 12: Property and Appraisal Requirements ANSWER: 12.6 A 1 A. TRUE Well and septic distances must meet current HUD Handbook OR state/county distance requirements

84 Chapter 12: Property and Appraisal Requirements Road maintenance agreements must be submitted to USDA for review and acceptance. A. TRUE B. FALSE 167 Chapter 12: Property and Appraisal Requirements ANSWER: 12.7 A B. FALSE Road maintenance agreements are not required

85 Chapter 12: Property and Appraisal Requirements Existing dwellings must meet the minimum property requirements (MPR) of HUD Handbook A. TRUE B. FALSE 169 Chapter 12: Property and Appraisal Requirements ANSWER: 12.9 A A. TRUE ONLY MPR HUD Handbook is all encompassing, ENTIRE handbook does not apply Appraiser must only certify to applicable portions New dwellings must meet MPR and MPS

86 Chapter 12: Property and Appraisal Requirements Purchase Price: $125,000 Appraised Value: $145,000 Loan Amount: $143, Exterior and Interior repair escrow cannot exceed: A. $14, B. $28, Chapter 12: Property and Appraisal Requirements ANSWER: 12.9 C A. $14, Exterior and Interior repairs may not exceed 10% of the total loan amount

87 Chapter 12: Property and Appraisal Requirements Bill (applicant) contributed $4500 of his savings to escrow account $750 remains after repair completion Bill may receive these funds back A. TRUE B. FALSE 173 Chapter 12: Property and Appraisal Requirements ANSWER: 12.9 C A. TRUE Inspection report must confirm repairs are complete Remaining funds from buyer/seller may be returned back to original owner Seller concessions/loan funds remaining must be applied to principal loan balance

88 Chapter 12: Property and Appraisal Requirements David s loan used a $3500 seller concession to repair a porch rail $300 remains after completion David may receive the $300 A. TRUE B. FALSE 175 Chapter 12: Property and Appraisal Requirements ANSWER: 12.9 C B. FALSE $300 must be applied to principal loan balance Seller concessions/loan funds remaining must be applied to principal loan balance

89 Chapter 12: Property and Appraisal Requirements Scott has a purchase contract for an existing 4 bedroom/3 bath home in a SFHA (flood zone) The lender must evaluate listings to document there are no other 4 bedroom/3 bath homes available in the community or within reasonable commuting distance outside of the SFHA A. TRUE B. FALSE 177 Chapter 12: Property and Appraisal Requirements ANSWER: B B. FALSE Scott has selected this home No additional research is needed, it is existing dwelling Obtain required flood insurance

90 Chapter 12: Property and Appraisal Requirements Phil wants to buy a home in a SFHA with a private septic What requirements apply to the water source for this home: A. Home must be serviced by public water B. A cap must be placed on a well in the event of flood C. Opening of well must be above BFE 179 Chapter 12: Property and Appraisal Requirements ANSWER: B A, B, or C Water source must be protected in the event of a flood Flooded septic should not mingle with water source

91 Chapter 12: Property and Appraisal Requirements Manufactured homes are eligible for the single close construction loan under A. TRUE B. FALSE 181 Chapter 12: Property and Appraisal Requirements ANSWER: A. TRUE NEW: Manufactured homes and site condominiums are both eligible for the single close new construction option

92 Chapter 14: Funding NEW: Agency guidance to process a request for restoration of funds is documented (14.7) ADVICE: Do not close the loan for more than the amount authorized by USDA on Form RD /18E 183 Chapter 15: Submitting the Application Package NEW: Preferred method of delivery for loan application/documentation to USDA is electronic (15.3) NEW: Addition of E to Form RD and Form RD to indicate electronic issuance (15.6 A) NEW: Expiration of Form RD /18E should not exceed one year for new construction pending State Director supplements (15.6 A)

93 Chapter 15: Submitting the Application Package NEW: Incomplete loan applications may be returned to the lender by USDA (15.6 C) NEW: Checklist for manually uw loan: 4506 T and VOR added (Att. 15 A) 185 Chapter 15: Submitting the Application Package Lenders must include all underwriting notes, internal documents, etc. with the loan application package submitted to USDA A. TRUE B. FALSE

94 Chapter 15: Submitting the Application Package ANSWER: 15.6 C B. FALSE Attachment 15 A determines documents required for submission KEEP IT SIMPLE 187 Chapter 15: Submitting the Application Package Attachment 15 A Revisions: Origination Stacking Order Checklist PAGE ONE: GUS Accept PAGE TWO: Manual UW, GUS Refer and Refer with Caution, and GUS Accept with Quality Control message

95 Read the instructions! Deleted: Income Calculation Worksheet 189 Deleted: Income Calculation Worksheet Added: 4506 T Added: VOR

96 Chapter 15: Submitting the Application Package Attachment 15 B Revisions: Agency Documentation and Processing Checklist AGENCY USE ONLY Many data fields removed due to GUS data 191 The whole first page is deleted: Information in GUS. MortgageServ check remains

97 File Type: Accept Full Doc (FD) Refer/Refer with Caution Manual 193 VOR added, when applicable 4506 T added

98 FEMA Flood Certification language moved to Note 195 RD Decision: Approved Withdrawn Denied Documentation steps included

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100 Chapter 16: Closing the Loan and Requesting the Guarantee NEW: The Lender Certification on Form RD /18E is explained in detail (16.2) NEW: Loan Note Guarantees (Form RD /17E) should be issued electronically (16.6 B) NEW: Reference to safe water with private septic for dwellings in flood zones (16.11 C 2) 199 Chapter 16: Closing the Loan and Requesting the Guarantee Conditional Commitments (Form RD ) are generally valid for days. A. 60 B

101 Chapter 16: Closing the Loan and Requesting the Guarantee ANSWER: 16.2 B. 90 Extensions are available New construction: valid up to date of anticipated completion Commitments remain valid in GLS until they are deobligated USDA must not deobligate funds until all appeal rights are expired 201 Chapter 16: Closing the Loan and Requesting the Guarantee

102 Chapter 16: Closing the Loan and Requesting the Guarantee Added: E 203 Chapter 16: Closing the Loan and Requesting the Guarantee A Loan Note Guarantee (Form RD ) may be issued immediately to the lender electronically once a loan closing is processed by USDA A. TRUE B. FALSE

103 Chapter 16: Closing the Loan and Requesting the Guarantee ANSWER: 16.6 B A. TRUE Loan note guarantees are issued electronically: Form RD E 205 Chapter 16: Closing the Loan and Requesting the Guarantee The lender is delinquent to remit payment to USDA for the annual fee USDA assesses a late charge to the approved lender The lender may pass the late fee to the borrower for payment A. TRUE B. FALSE

104 Chapter 16: Closing the Loan and Requesting the Guarantee ANSWER: (h) B. FALSE Lenders may not pass any late fee charge due to payment of the annual fee to the borrower 207 Regulations guidelines

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106 Thank you for supporting the USDA Single Family Housing Guaranteed Loan Program!