Document Sample
               September 10, 2009
                 Gainesville, FL
1. Is Homebanc doing RD?
A.     Yes, as far as we know.

2. Multi-family, does that include condo conversion projects?
A.     Individual units can be financed with the RD Guaranteed loan if they would
normally serve as security for an FHA, VA, Fannie Mae, or Freddie Mac loan.

3. Can we still get a no fico score approved?
A.       RD does not have a minimum credit score. However, excellent compensating
factors must be documented when the score is 619 or lower. Underwriting lenders have
the full authority to underwrite the credit. Many have a floor FICO. Alternate credit is
allowed when there is regular credit history (FICO) available.

4. Are foreign nationals using property as owner occupied, but second
home, eligible?
A.     No.

5. Is there ysp on the rate?
A.     Yes. Check with your wholesale lender.

6. Is there seasoning requirements for BK, Short Sales, etc.?
A.     No. Lenders may have a policy.

7. Are there restrictions on collections after an old BK or foreclosure?
A.     The underwriting lender makes the credit decision. See RD Administrative
Notices (ANs) posted on Allregs or at Click on
“Administrative Notices” and look for those with “(1980-D)” in the title.

8. Are manufactured/mobile homes acceptable?
A.      New manufactured homes purchased from an RD approved dealer-contractor are
allowed. RD does not require HUD set up since the State Of Florida requirements match
or exceed HUD requirements. RD does require that the home have concrete block with
stucco or brick instead of skirting. Minimum landscaping, walkways, concrete parking
pad, and all-weather driveway with surface comparable to the road. No mobile homes
are allowed.

9. What is needed for condos? Is there an approval process?
A.      The underwriting lender must determine that the unit meets the qualification of
FHA, VA, Fannie Mae, or Freddie Mac. The customary appraisal addendum and
certifications are required.

10. Does USDA have marketing materials available for distribution to
realtors and such?
A.       The RD brochure posted on the web site,
can be used. Replace the RD contact information with your own. If you cannot convert
it for your use, request a Word version from the RD FL/VI “State Office”. Email

11. Must a manufactured Home Builder be a licensed General
Contractor to finance the perm loan to take out a construction loan? If
so, is this state specific?
A.      The dealer may contract out the set-up work. However, a standard one-year
warranty is required. If there is an interim construction loan set up to pay for the home,
set-up and all related amenities, a take out loan may be processed. The set-up
requirements may by law from state to state. Contact RD in the state where the home
will be set up.

12. Can you possibly list a few lenders that will do construction/perm
USDA and / or escrow for repairs?
A.     We do not track which lenders offer that type of financing.

13. How can you have a home purchased for resale and not qualify this
as an investor property?
A.      RD does not have a restriction on the seasoning of the title. There is a
requirement that the home be owner occupied. The customer can own only one other
property if certain conditions are met. If you are aware that the purchase is intended for
only a short period hold for resale, you should not process it as a RD loan.

14. Since we can not talk to the appraisers how can we get them to do
this additional paperwork?
A.     What additional paperwork? We are only asking that a FHA appraiser be
contracted to do the appraiser and they certify on the appraisal that the home meets the
minimum requirements of the HUD Handbooks 4150.2 and 4905.1. There is no
additional paperwork.

15. Hi rise, low rise or condo hotel ok?
A.     Condo hotels are not allowed.

16. Would a foreign buyer, i.e. British, Canadian, etc. who spends half a
year or so in the US, qualify for a USDA loan?
A.     No.

17. What did he say about condo requirements? They just have to be
Fannie approved?
A.     Fannie, Freddie, VA, or FHA

18. Are tie-downs ok or only on foundations?
A.     Stick built homes must meet local and state code. In Florida they must be on
foundations or slab AND tied down. Check with your local RD in other states.

19. Does USDA require an appraisal to refinance a current USDA loan?
A.     Not unless loan closing costs are wrapped into the loan.

20. Can we loan for housing purchased by a lake as long as the homes
are not leased?
A.      Yes if they are standard construction and typical for the area. Can the appraiser
find 3 very similar comparables? A-frame or log homes are not typical in FL but they
may be typical in another state. Additionally, be aware of whether or not the property is
in the 100 BFE flood hazard area.

21. What about owner occupied second home?
A.     No, primary residence only.

22. On new construction, are credit docs also required to be updated
after six months? Or only the appraisal?
A.      Credit must not be more than 180 days old at the time of the final loan closing.
The appraisal is valid for only 180 days. It is crucial that a pre-construction conference
be held with the builder and customer so that a clear understanding is reached in regard to
build the home timely. If the Commitment is due for renewal, it will be limited to the
appraised value. Typically the customer does not have a substantial cash reserve. The
conference is a good opportunity to assure that the description of materials and plans are
very detailed. Allow the builder to use allowances can be disastrous for the uninformed
customer that cannot afford cost overruns.

24. Is Pinellas County going to be considered for future ability to use
this loan?
A.     No.

25. If appraisal comes in lower than the sales price do we go by the
lower? Also does USDA allow for Power of attorney or do we check with
the lender we are selling to?
 The loan is capped by the appraisal (plus the amount of RD fee financed).
 Check with the lender. OK with RD if the borrower will be available to move into
   the property. The property must be owner occupied.

27. Are the utilities required to be on during the appraisal as FHA
A.    How else can the appraiser determine if the house meets minimum FHA
Handbook requirements and is safe, decent, and structurally sound? Answer is yes.

28. If you have a mobile home that was gutted and redone completely
with stucco, would that be included?
A.     No. Existing MH cannot be guaranteed by RD.

29. What about divorce? If a wife was on title but not on mortgage, can
she purchase prior to divorce if they quit claim deed?
A.      Yes. Spouse must sign mortgage if the loan is closed prior to the final divorce

32. Is it household income? Can wife buy without husband? I'm
thinking no. In other words, his income would put them over the limit,
but he would not be on the loan.
A.    The income of all adults who will occupy the home must be counted in total
household income.

33. What about boathouses?
A.     Must be real estate.

34. Do you use the gross or net rental income for the borrower's Income
A.       Gross monthly rent reduced 25% before subtracting out the principal, interest,
insurance, HOA dues, and any other reoccurring housing expense. Any negative amount
is treated as zero for household income but must be include in the ratios.

35. So divorce needs to be final and free can clear from title from
previous house?
A.     No. If not divorced, spouse must sign the new mortgage (in FL). Old debt will
count until there is 12 months history (with proof) that someone else is paying the old

36. Please clarify the flood zone requirement - well head and septic
drain field
A.      The well head must be protected from flood water contamination. Septic drain
field will not work in flooded conditions and must be elevated to where it is functional in
case of the once in hundred year flood.

37. Is there a min time from discharge on a Chap 13?
A.     No. Underwriter makes the credit decision based on the circumstances.

38. Outbuilding. Can it be a mother-in-law house ok?

A.     No. That has the good potential of being income producing if it were rented out.

39. Will Rural ok the purchase of a new home with retention of a
current home when the borrower needs a new home due to med
A.      This was answered elsewhere. RD allows the retention of one home. Can they
afford to own two properties? Are they experienced landlords? If in FL, they would lose
their homestead exemption. What if the shingles need to be replaced or other
maintenance is needed? Do they have ample cash reserves?

40. Compensating factors for chapter 13, would that be like loss of job,
real estate market tanking and lost everything? Like having 20 years of
perfect until 2007?
A.    The underwriter can consider any circumstance as long as the situation was
beyond the customers control, has been removed, and is not likely to occur again.

41. What if one of the adults moves from the home?
A.    No one has control over what happens post closing. This loan is the same as any
conventional loan in this regard.

42. What is the max loan amount?
A.     None. It is limited only by:
      Appraised value (plus any RD fee financed)
      Repayment ability. The product has income limits. Therefore there is a practical
       limit that varies family to family depending on their income.

43. Does 401k contributions count in the income calculations, so the
gross 85k but net 70k each year?
A.      Use gross income.

44. Are non resident aliens and green card holder applicants eligible?
A.     No. Look at the Handbook posted at Click
on “lender information”.

45. With overtime income reflected in the ytd income can a u/w used
that income calc to determine whether or not a person makes to much
money for this program? I know for us to be able to use the income for
qualifying ratios we have to have proof the OT will continue shouldn't
that be the same standard for the u/w to use?

A.      Income for repayment and projected income can be different in many cases. For
total household income, you cannot ignore that overtime is likely to continue unless you
have very good documentation from the employer that it ended some time before the
application process and that it will not likely resume.

46. Does unborn child count as a dependent?
A.     No

47. Does borrowers 21 year old son who lives at home income need to be
A.     Verify the income of ALL adults who will occupy the home.

48. What if full time student in college with no income?
A.     If you need it, they get one $480 deduction from the household income.

49. Is there a minimum age and or number of people living in the

A.     No

50. How about full time student that works part time?
A.     Adult student income counts in the total household income. Student income can
be used as a compensating factor (see RD Instruction 1980-D at

51. Are collections due required to be paid off?

A.      Credit decisions are made by the underwriting lender. There is no requirement by
RD that the collections be paid. Paying them does not establish an improved credit
history. In fact, it can put the customer in jeopardy by depleting their cash reserves to
pay the collections. Check with the state law in your state (other than FL) regarding
whether the collections can gain lien priority.

52. Am I correct to understand the underwriter is the decision maker?
If they approve, you automatically confirm the approval, I am unclear
of the process of why they approve and then send off to you? Am I
correct to think you do not re-underwrite the file?
A.     RD does not underwrite the file. However, RD must grant a waiver if the ratios
are over the 29/41 or 31/43. Rarely would RD turn a loan down on basis underwriting.

We do a thorough compliance review for document check and re-check the income
calculation for household income, recalculate the ratios, review the appraisal, and do an
environmental review.

53. Is non-traditional credit for no score only?
A.     Yes. Minimum 3 trade lines, non-relative, no 30 day late payments, rent is the

54. If a property and income is eligible in FL can a person who owns a
home in another state, receive a RD loan?
A.      Possibly. Can the low-moderate income family afford to be a landlord? Can they
risk not having insurance cover on the other home if it cannot be occupied for some
reason? Can they afford the maintenance on two homes? Keep in mind that the typical
customers does not have cash reserves, likely has payment shock, and ratios are tight.
You should not encourage this practice. The goal is that the customer will be successful
home owners over the long run.

55. Will RD preapprove borrowers who are looking for a property?
A.     No. We do have the staff hours available to assist in this regard. Underwriting
lenders can pre-approve them. RD rarely denies a loan that has the underwriter’s
recommendation with documentation.

56. If the borrower's credit score is above 620, is it mandatory to have at
least 3 trade lines?
A.     Yes. A history of good credit is essential.

57. What is RD current turn time?
A.      That varies from RD office to RD office and day by day. RD in FL will have
processed around 7,000 loans by year’s end (September 30). In 2007, it was 780. In
2008 it was 2,087. No additional full time persons were added in that time (no authority
to do so). Keep in mind that with each submission, RD also handles a loan closing
package in order to issue the Guarantee to the wholesale or holding lenders and set up the
loan on our system. The RD staff working your loans also has the Agency’s DIRECT
loan to administer along with loans/grants for repairing homes.

58. Do you allow power of attorney to close?
A.      Yes, but the borrower must be available to occupy the home. Military personnel
are an exception but they must have a family member available to occupy the home.

59. What is an H-1b is this allowed?
A.    I have no idea what this refers to. Sorry.

60. To be clear on the septic inspection. If an FHA approved appraiser
notates “septic appears to be functioning and appears to be in working
order" will you require a full septic inspection?
A.    No. However, the lender can call for one.

61. When will GUS be available for brokers?

A.    We do not know, sorry!

                August 12, 2009
                Gainesville, FL

1. What is the benefit for lenders to underwrite the loan?

A.     Underwriting lenders make the loan decisions which may speed up
processing. They deliver the loan packages directly to RD. They have
access to the Guaranteed Underwriting System (GUS), the free web based
processing/underwriting system. The lender obtains a Guarantee directly
from RD. They can either hold and service the loans or sell them on the
secondary market. Typically they earn a servicing release premium on sold

2. You said “no loan limit”. Does this apply to jumbo loans >$417,000.00 as
long as it is a primary home?

A.     The loan is capped only by repayment ability and the appraised value.
The Agency has income caps. Therefore the repayment ability is limited to
what is affordable to families with income within the RD maximum adjusted
gross income limits.

3. Can you combine the $8000 tax incentive with RD loans?

A.    The tax incentive is an IRS program. The recipient will receive a
refund when they file their federal tax return. The type of financing has no
bearing on the refund. RD has no restriction on subordinate financing.
Therefore the customer can utilize any interim financing that advances the
IRS refund.

4. Do you have any refi programs?

A.    Only to refinance existing RD Direct or Guaranteed loans.

5. How exactly does the 2% fee work? Is it like the FHA upfront MI?

A.    It is collected as part of a post closing package submitted to RD by the
closing lender. It is not MI but it is an upfront fee.

6. How will ‘designated’ areas be affected or impacted after the next census
is completed?

A.     A survey of the areas will be taken to determine if and where to move
the present boundaries of the non-eligible areas. It is not based on census
tracts or zip code. Changes will likely not occur until 2012.

7. How quickly are the maps updated for new communities that have been
built recently?

A.      That information is collected by a contracted service. Typically they
update in about 90-180 days. Use the county map in the ‘eligibility’ web
site to determine if the subdivision is in the eligible area. We have an excellent guide for using the
site posted at

8. These do not require FHA #, just an FHA approved appraiser, correct?

A.    Correct. We expect the FHA appraiser to certify that the home meets
the minimum requirements of HUD Handbooks 4150.2 and 4905.1 or will
express what repairs/additional inspections are necessary in order to meet
the Handbook requirements.

9. May a borrower own other investment property?

A.   They can own only one additional residence. Typically that is the
home they are vacating.

10. Why does this program discount the value of an in-ground pool in
Florida? This is common for the market.
A.      This is a national rule. Regulations prohibit in-ground pools but RD
has found a work-around by limiting the loan to the value “as if” the
property has no pool. There is no wavier form. The appraiser should do
their “as is” value as usual. In addition, they must document the value “as
if” it had no pool. By finding very comparable sales that had no pool, and
by leaving out an adjustment for the pool, they can determine as reasonable
value from the adjusted sale price “as if” the property had no pool.

The rule has caused insignificant problems since the “as is” value may be
higher than the contract, or the buyer is contributing funds, or the seller is
contributing funds.

11. A lot of sites these days exceeds 30% of the total value- is this a hard
and fast rule?

A.    When the value of the site is typical for the area, as evidenced by the
appraisal, and the site cannot be subdivided into two or more sites, the 30
percent limitation may be exceeded.

12. Does private school tuition count towards child care?

A.    No. They have the option of public school. Only the extra expense
associated with child care when a school has a before school or after school
childcare service to accommodate the working parents for an extra fee.

13. Can you include tutoring expense in the income qualification?

A.    No.

14. For child care what if you have a stay at home mother?

A. Child care expense is not allowed when there is an able-bodied adult
member of the household available to provide the care. Child care is
deductable only to the extent to enable the adult(s) to be employed. In the
example, if the mother chooses to engage in activities that the child cannot
attend, the child care is not deductable.

15. You charge 2% on the 2% if the fee is financed?

A.     Yes, the 2% fee is based on the final loan amount. Therefore they are
being charged extra fees because the loan amount increased with the
inclusion of the fee. Always divide the base loan amount (pre-fee) by .98 to
determine the final loan amount. The total LTV with the full fee financed is

16. For the submission process, we are submitting this stuff to the wholesale
lender or RD directly?

A. Only RD approved lenders can submit loan packages directly to RD.
The loans must be underwritten prior to delivery.

17. It is my understanding the max. Origination fee that can be charged is
1%. Is this correct?

A.    That is not a RD limit. Perhaps that is a lender policy.

18. I want to confirm that we can do USDA loans if the home has a pool as
long as it is not used in the value?

A. Yes, that is correct. You may hear that RD cannot finance homes with
in-ground pool. The Reinvestment and Recovery Act (ARRA) prohibits
loans on properties with pools. However, RD has other funding sources that
are being used to finance the homes with pools.

19. If our lender does have credit overlays that preclude the loan from being
approved can we have the customer contact the Rural Housing office and
submit their loan request directly?

A.     No unless the customer’s income is low or very-low income (by RD
definition) and they are otherwise fully qualified. The income chart is
located at: Click on “Direct” under
“Income Limits”. Use the low income category (or lower).

20. Are you at liberty to disclose lenders who are part of this program?

A.    RD can provide a list of RD approved underwriting lenders.

21. Are RD 502 guaranteed loans assumable?

A.    Yes. However, the current borrower is not released of liability.

22. If the borrower is the only person on the debt that they took out for son,
etc. and you can prove by cancelled checks that the son is paying, does that
need to be included in the debt ratio?

A.     Minimum of 12 months of cancelled checks if the father co-signed a
loan for the son and is not the owner. Otherwise it’d be treated as rental

income and the existing home would be looked at in consideration as to
whether or not they own an adequate home.

23. If you have a GUS approval with 38/47 ratios. Are we required to still
get a ratio waiver?

A.    No

24. How do you treat self employed debt which reflects on their personal
credit report that is paid by the business? Is a letter from the CPA ok or
would require 12 months canceled checks?

A.    There is no definitive answer in RD regulations on this issue. Is the
business a sole proprietorship? If the business doesn’t pay the debt, is the
customer personally responsible for the payment?

25. What’s the turn-around time for RD to provide the guarantee for a loan

A.    The Guarantee should be delivered to the RD approved lender’s
closing department within 10 days of receipt of the closing package.
However, this depends upon receipt of a complete and error free package.

26. Do you have in-house counseling to instruct the homebuyer on the

A.    It is the lender’s responsibility to know the product well enough to
council with the customer. Information for individuals is posted at

27. FHA no longer requires a WDO inspection report unless the appraiser
notes possible problem. I also confirmed with USDA in WPB, FL that is not
a current requirement for USDA since it is not for FHA. Can you please
confirm if we must have clear WDO inspections?

A. I am removing my comments from the presentation. The WDO is
required only when the lender or appraisal calls for it, or if required by
county or state.

31. Can you give guidance on the maximum allowable rate we charge on a
USDA loan? I think Fannie Mae has started to raise their rates for this

A.       The preferred interest rate cap most widely used is the Fannie Mae ninety day delivery
rate plus sixty basis points rounded up to the nearest quarter of one percent. Fannie Mae
historical rates may be found on the internet at:

VA does not publish a daily interest rate; therefore lenders should refer to published rates offered
by their institutions. The correct VA rate to select is the “par” rate with no discount points. If
using the VA rate, lenders should document it with their rate sheet on the date the rate was

In all cases, lenders are responsible for documenting the date the interest rate is locked. The lock
date is the date on which lenders and borrowers agree to a specific interest rate. The date the
rate is locked will be utilized to calculate the maximum allowable interest rate.

32. I had a customer that paid for the appraisal up front and the lender would
not allow the customer to be reimbursed that at closing… was this a lender

A.     Only the prepaids (by the borrower) that are included in the loan can
be reimbursed. They paid it ahead of time, then the loan was increased, then
they receive their reimbursement from the loan funds.
Perhaps the prepaid had not been included in the loan.

33. All adult income, even if they are not signing the note?

A.    Yes, verify income of all adults to determine if the projected adjusted
gross annual HOUSEHOLD income is less than the RD limit for the county.
Remember, the verification of non-applicant income is not as onerous as for
the applicant.

34. What is Repayment Income?

A.     No different than with any other loan program. It is the income of
those individuals that will sign the promissory note.

35. As I understand, these are not portfolio loans for the lender, right?

A.     The RD approved lender is responsible for servicing the loan. If they
retain the servicing and the loan is foreclosed, the lender places a bid. If the
bid is successful, the lender, not RD, will own the REO.

36. May a borrower purchase a home with an apartment to lease attached
and the co-borrower already has as apartment?

     A.        No. Cannot be income producing property.

37. I’m sorry the co-borrower already owns a home and the applicant and
co-borrower are not married says a family member (her father).

A.     Married or not has no bearing. The question becomes whether or not
they already own a suitable home.

37. If you use child care expense do you have to use it in the debt ratio?

A.        No

                 June 18, 2009
                Gainesville, FL
Can a property with an in-ground pool qualify?
Yes. The base loan is capped by the value of the property as if it does not have a pool.
The FHA appraiser should do the normal ‘as is’ appraisal and then add in a sheet with
three additional comps without pools. Since the goal is to find a value while pretending
there is no pool, they should not make an adjustment for the pool on the three additional
comps. Rather, they would simply review the three values after doing the other
adjustments and make a determination of value. If the appraiser opts to establish a
contributory value of the pool by making adjustments for the pool and then subtract it
from the ‘as is’ value, they must thoroughly document how they derived that adjustment.
Reminder, the amount of the one time RD guarantee fee can be added in excess of the
appraised value.

Can my client obtain GLS financing with a FICO score less than 610?
The underwriting lender determines creditworthiness of the customers(s). RD does not
have a minimum credit score. Lenders may set a policy for a minimum FICO. The RD
guidelines show that it would be extremely difficult to qualify with a FICO of 580 or less.
Again, the lender’s underwriter will make the determination based on adequate
compensating factors. A recent bankruptcy or foreclosure should not be an automatic
denial of the loan. The underwriter must determine if the circumstances were beyond the
customer’s control, have been removed, and likely will not reoccur. In addition, non-
traditional credit may be used for a customer without the customary credit (FICO). See
the Administrative Notices on credit, non-traditional credit, and underwriting posted at Click on the “Administrative Notice” link.

Can a house with a stamped concrete floor instead of carpeting, tile, or
wood quality for the program?
New homes must comply with local and state code.
Existing homes must only comply with the requirements of HUD Handbooks 4150.2 and
4905.1. See the Handbooks and FHA Mortgagee Letter 2005-ML-48. Generally
conditions that would warrant additional repairs include those that pose a threat to the
safety of the occupants jeopardize the soundness and structural integrity of the property;

or adversely affect the likelihood of a low- to moderate income borrower from becoming
a successful homeowner.

What about the completion of phases within an association – is there a
requirement for a percentage of properties that have to be sold?
Yes, for Condominium projects. Condominium and other non-PUD projects served by an
HOA must be approved or accepted by HUD, VA, Fannie Mae, or Freddie Mac in order
to meet the requirements of RD Instruction 1980-D, section 1980.311(c) [available at]. Those entities have established minimum requirements.
No, for other types of housing. Lenders participating in the Guaranteed Loan program
may rely on FHA’s general acceptance of PUDs for compliance with the requirement in
RD Instruction 1980-D, section 1980.311(c) when the subject dwelling is in a PUD.

Is Homeowner Education required?
Lenders may require it. It is highly recommended but not required by FL/VI RD. It may
be required in other states.

Can names be given out of specific lenders who work with customers
having FICO scores less than 620?
No. That is not tracked. What is tracked is the default rate of both brokers and lenders,
down to the branch level. A recent study shows that 23% of the RD loans were made to
customers with FICO if 619 or less or had no score. Those have caused 55% of our
losses. Keep in mind that most customers borrow 100%, have no cash or very little cash
for handling the emergency repairs, are likely suffering payment shock, and are marginal
on ratios (impeding saving for major home expenses such as the shingles that will be
needed at some point). We want the customers to be successful home owners.

A property is in the eligible section; however there is evidence of
sinkhole activity. What are options for Rural Housing financing?
We understand that there are disclosure requirements by law. RD does not have a
specific requirement regarding sinkholes. However, RD does an environment desk
review on each property based on the information provided in the file. The Agency could
require testing for sinkholes. It would be prudent to do the testing in advance.

Please explain what is meant by debts six (6) months and older.
The repayment ratio must include long term obligations include those
obligations such as alimony, child support and other obligations with a
remaining repayment period of more than 6 months and other shorter term
debts that are considered to have a significant impact on repayment
ability. A common misconception is that a longer term debt can be paid
down to 6 months prior to closing and then it wouldn’t count. Wrong!
Example: A customer has with monthly income of $4,000.00 have ratios of
34-45 after a $400/month car payment is paid down to 6 months. The
question begs, how will they survive the first 6 months?
The sales price of the home is higher than the appraised value, but the homebuyer has the
funds to reduce the amount down to the appraised value. Does GUS support this?

Yes, reluctantly. There could be an extreme case out there. If so, consult with your local
RD office. We like to watch out for the customers. Perhaps the customer could use some
home owner education or sound financial advice. You could help in this regard.

Does the local Rural Housing Office sign and approve the credit waiver
provided by the underwriter?
No. There is no such thing as a credit waiver by RD. The RD Instruction 1980-D clearly
gives the credit decision to the lenders. That is national. However, the lenders are
expected to follow the minimum RD Administrative Notices. The lenders can set a
higher standard. The underwriter must clearly document any compensating factors when
the FICO is less than 620 or a Chap 7 bankruptcy discharge or foreclosure happened
within 3 years, Chap 13 restructure plan within past 12 months, or a late mortgage
payment within 12 months. CAIVRS must be checked and documented on the 1008.

How do you calculate student loan deferred payments if they are not
shown on credit reports?
Use the minimum scheduled payment that will be due if the interest rate and term are
known. If the rate is not set, use a 1% amortization and the term of the loan.

Explain what you mean by, “These are not gross income limits.”
Project the cumulative gross income of all adults in the household.
If total income exceeds the limits, certain adjustments can be made, such as childcare
expenses for children age 12 or younger. You can deduct $480 for anyone under 18 or a
student who is not one of the applicants. Other deductions may be available. No need to
memorize deductions. Use the calculator at Click
‘single family’ under “Income Eligibility”
Example: Clay County 4-person family (2 adults, 2 children) has a gross income of $85,860.

Child care for the two children age 12 or less is $10,000 annually. Is the threshold income at
or below the limit? YES. $85,860 less 10,000 child care less $480 for each child = $74,900.

Can they get cash out on purchases if the value is higher than the
Only for reimbursement of their pre-paid expenses that were included in the loan, such as
the application fee, credit report fee, deposit on the contract, appraisal fee. If those we
not included in the loan, then they would not be entitled to cash back.

Is this program for first time homebuyers only?

Do we count all person’s income living in the household, or just the ones
who will be on the loan?
For the calculation of adjusted HOUSEHOLD income (Key word is “household”): count
the income of all ADULTS who will reside in the household and compare that to the
adjusted gross HOUSEHOLD limit for the county. If it is under the limit, no further
adjustments are necessary. However, if they are over the limit, look for adjustments.
Use that EASY method I showed you; go to the calculator at Click on ‘single family’ under “Income Eligibility”

How is income verified for people who will not be on the loan?
Use minimum documentation to reasonably indicate their anticipated income for the next
12 months. Examples: One of or a combination of recent pay stub that shows YTD;
earnings; W-2; latest SS and/or disability award letter. If the income is very close to the
maximum limit, I recommend that you add ample documentation in case of an audit.

What happens if the income is not included for all persons in the
Intentionally doing that constitutes fraud. Only adult income is counted. Do not count
the income of a wage earner under age 18 unless the have been legally declared an adult.

What is the age to qualify for the income adjustment for the elderly?

Elderly family. An elderly family consists of one of the following:

       (1) A person who is the head, spouse, or sole member of a household and who is
       62 years of age or older or who is disabled and is the applicant/borrower or the
       coapplicant/coborrower; or
       (2) Two or more unrelated elderly (age 62 or older), disabled persons who are
       living together, at least one of whom is the applicant/borrower or

Can they underwrite directly through USDA? Some underwriters take
as much as 60 days to make a determination and have “too many
No. Many lenders are extremely busy. Be aware that the RD does not have a Direct
Endorsement program. A loan file is delivered to the appropriate RD office for review.
Therefore, the realtors and your loan officers must allow for additional processing time.
The RD volume is running about 3-4X last year and perhaps 9-10X 2007. Additional
staff cannot be hired. In addition, the lenders ship another post closing file to RD where
it is reviewed for issuance of the Loan Note Guarantee. This nearly doubles the work in
comparison to the initial file reviews.

Can financial institutions become originators of these loans?
a) Qualification. The following Lenders are eligible to participate in
the RHCDS guaranteed RH loan program upon presentation of evidence of
said approval and execution of Form RD 1980-16.

      (1)   Any State housing agency;

      (2) Any Lender approved by HUD as a supervised or non-supervised
      mortgagee for submission of one to four family housing applications
      for Federal Housing Mortgage Insurance or as an issuer of Ginnie
      Mae mortgage backed securities;

      (3) Any Lender approved as a supervised or non-supervised
      mortgagee for the VA;

      (4) Any Lender approved by Fannie Mae for participation in one to
      four family mortgage loans;

      (5) Any Lender approved by Freddie Mac for participation in one to
      four family mortgage loans;

      (6)   An FCS institution with direct lending authority; and

      (7) Any Lender participating in other RHCDS, Rural Business and
      Cooperative Development Service, Rural Utilities Service, and/or
      Consolidated Farm Service Agency guaranteed loan programs.

What is the difference between the Direct and Guaranteed programs?
The Guaranteed loan is the loan you process for moderate income families. The USDA is
the guarantor, similar to the way VA operates. When a loan is foreclosed, the lender has
the REO and post selling, files a claim that is paid directly from the U.S. treasury.
The Direct loan is one made DIRECTLY by RD to low and very-low income customers.
We do the full processing, just like any other lender. The Agency provides payment
assistance, meaning we help make their payment, for those loans where the family cannot
afford the full note rate payment.
When the Eligibility web site shows that they are eligible for both products, you try the
Guaranteed loan first but if they do not have repayment ability and other eligibility
criteria look good, refer them to RD. You do not earn a commission but you save a deal
for your realtor/builder and help a family fulfill their home ownership dream.

Does Rural Development do loans in other states?
Be a natural person (individual) who resides as a citizen in any of the 50 States, the
Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the
Commonwealth of the Northern Marianas, Federated States of Micronesia, and the
Republics of the Marshall Islands and Palau, or a noncitizen who resides in one of the
foregoing areas after being legally admitted to the U.S. for permanent residence or on
indefinite parole.

How are child care expenses determined? Are they only for day care
Provide a statement from the child care provider. A deduction for the
care of minors 12 years of age or under, to the extent necessary to
enable a member of the applicant/borrower's family to be gainfully
employed or to further his or her education. The deduction will be
based only on monies reasonably anticipated to be paid for care services
and, if caused by employment, must not exceed the amount of income
received from such employment. Payments for these services may not be
made to persons whom the applicant/borrower is entitled to claim as
dependents for income tax purposes. Full justification for such
deduction must be recorded in detail in the loan docket.

Are escrows a requirement?

What lenders are doing Construction to Perm loans?
We do not track that in Gainesville. You can check with your wholesale lenders and your
Area RD office.
Find FL/VI office locations at Substitute the 2-letter
abbreviation of any other state for the “fl”.

I do not recognize this acronym. If you asked this question, contact me.

Can loan funds be used for rehab if the value of the property is higher
than the purchase price and the overage will cover any rehab costs?
Yes. The appraiser should do an ‘as improved’ appraisal. The lender must control the
process, similar to what they would do for a construction-perm loan, depending on the
scope of the project. It is up to the lender to decide whether or not the customer will be
permitted to do the work. The loan can include anything typically considered part of the
structure, including built-in appliances. RD will not issue the Loan Note Guarantee until
the project is completed, inspected, and the lender certifies the loan conditions have been
met. The work should be completed within 6 months. That is because there is a
requirement for a new appraisal at the end of 6 months. If the property value declines at
the 6 month, the Commitment may not be extended or it will be extended at a lower

Is this a 203K?
No, but can be very similar in that all kinds of home improvement or renovation can be
included in the loan, up to the ‘as improved’ appraised value.

What is the definition of a manufactured home, i.e. HUD or DCA
First, the homes must be new and purchased from a RD approved dealer.
Homes must be financed and taxed as real estate. Mortgages will be
taken on the home and the property the home is set up on. Homes must be
classified as real estate prior to loan closing or the issuance of a
guarantee, with a permanent registration obtained from the local tax
All towing and running gear must be removed from the home and the
property. Any credits from the dealer must be itemized in the
The space between the ground and the home must be enclosed with a
permanent perimeter enclosure wall constructed of either brick or
concrete block and stucco permanently installed on a concrete footing.

Aluminum, vinyl, wood, plastic, stucco on lath, etc. are not considered
permanent enclosures and are not acceptable. The crawl space below the
home must be properly ventilated and have an access door per
requirements of the Florida Building Code.
There are additional requirements, see the set up requirements posted
The requirements may be different in other states.

What is an acceptable payment shock percentage? Or what is the
maximum payment shock?
None stated. For example, it could not be mathematically measured for a customer that
presently has no housing expense. They must demonstrate reasonable repayment ability
based on all the facts.

What if a borrower refuses to pay collection accounts that are in
There is no rule that says collections must be paid. The credit decision is left up to the
lender’s underwriter.

What about medical collections?
The lender’s underwriter makes the credit decision based on the circumstances presented.
This may be influenced by the FICO. The lower the FICO, the harder the underwriter is
likely to look at collections.

Can seller concession be used to pay down/pay off borrower
No. They can pay the customary closing costs commonly shown on the HUD-1. They
can pay for expenses directly associated with the property. For example, a builder can
offer a free upgrade. They cannot provide anything else such as: prepaying the HOA;
pay utility bills into the future; pay payments on an existing mortgage; years supply of
Omaha steaks, etc. Instead, they should reduce the price of the property.

How do we resolve if Underwriters differ from USDA guidelines?
Lenders can set threshold underwriting standards that are more stringent than the
minimum requirements of RD. Remember, they must protect their own interests as well
as those of the customer and RD. If you think they are ignorant of the RD regulations,
visit with their supervisor. RD will be happy to provide training for underwriters.

Are Rural Housing auditing teams aware of the requirement for the
annual review?
RD does not have designated “auditing teams”. The annual review is something done at
the RD state offices to determine if any lenders qualify for the required two year or five
year reviews within that year. The Agency has certain threshold criteria that trigger the
reviews. The lenders approved by our national headquarters that meet the triggering
requirements are audited by both a professional contracted company and through selected
desk audits. RD may select additional lenders and even audit brokers that originate a
high number of defaulted loans. In addition, the Agency may review loans developed by
newly eligible lenders. Typically this is done by monitoring the quality of he loan
packages submitted to RD.

Who has access to GUS?
Only staff of lenders who are RD approved underwriting lenders and also approved as
GUS users. RD approved underwriting lenders not using GUS should contact me to start
the simple process. Lenders can set up to offer GUS to only certain branches. There no
longer is a requirement that they offer GUS through all branches nationwide.

When does the package go to USDA?
Post underwriting. Use the RD checklist posted at
Click on ‘lender information’ link. We want only the minimum essential documents.
Only RD approved lenders are permitted to submit any loan documents to RD.

Are there any prohibited fees? For example, FHA prohibits charging
for Tax Service Fees.
Any fees required by local or state statue are permissible. In addition, Fees charged by a
lender to borrowers for loans guaranteed under the SFHGLP should not exceed fees
charged by the same lender for loans insured or guaranteed by the FHA or VA. Other
high loan-to-value home mortgage products can also be used for comparison. A lender
should be able to document that the charges or fees assessed against borrowers whose
loans are guaranteed under the SFHGLP do not exceed charges or fees routinely made by
the lender for similar transactions such as FHA or VA loans.

Can closing costs be financed within the 102 Loan to Value?
Not exactly unless you are including the 2% RD fee. When the appraisal exceeds the
contract, the amount of difference can be used to cover the regular closing costs. The

base loan with normal closing costs is 100% LTV. The RD fee can always be tacked on.
Financing in all the RD fee will result in a LTV of 102.04%. We don’t want to try to
explain a 102.”04”% fee, so we say it is 102% LTV in our advertising.

What happens when a borrower is married, but her estranged husband
is no where to be found. Is there a way around that since the husband
won’t sign? There is no divorce or separation agreement.
See your closing agent. You must be able to obtain first lien, MARKETABLE title.

How about a 1099 employee? Are they expected to have a P&L?
That depends on the situation. It is up to the lender to show adequate documentation to
prove repayment ability. If they are truly self-employed, then yes. 2 years W-2 and

Who do I inform about where to send the Loan Note Guaranty?
Provide a cover sheet on the LNG request to the RD office that processed the initial
package for Commitment. The Commitment’s condition on FL/VI has the loan closing
checklist. In FL/VI, send to the RD office serving the county where the property is
located. You can find a directory at

Social Security – what is the percentage increase? 125%?
All non-taxable income is grossed up 125%

With the GUS updates, are more loans being “referred” if the
bankruptcy is within 18 months? They have 2 denied like this which
was approved a couple of months ago.
GUS is not an underwriter. I cannot stress this enough. A ‘refer’ or ‘refer with caution’
is not a reason for denial of the loan. The streamlined processing for FICO of 620+ did
recently change so that the underwriter must now manually determine if the bankruptcy
was beyond the customer’s control, circumstances have been removed, and are unlikely
to reoccur. Before RD would take up the sword for you, you’d have to show that there
was absolutely no other reason the loan was denied. Rarely are two loan situations

What if a borrower has an employment contract starting in October,
but is currently not employed due to relocation?
That is a unique case and cannot be answered from the small amount of information
given. Work with your underwriter on this. Evidently they did not relocate because of

I have a couple who receives Social Security income and has 2
discharged Chapter 13 bankruptcies in 2005 and 2206, with no other
credit history. Can they qualify for RD?
Use non-traditional credit history and talk to your underwriter.

Gift funds were covered, but do funds to close and/or EMD have to be
sourced/seasoned if large deposit not from payroll and not gift funds?
That could be a lender issue. Lenders are free to establish a policy beyond the minimum
required by RD. I’m not familiar with the acronym “EMD”. RD is not concerned about
the source of funds to close unless it is borrowed. Then the repayment must be shown in
the ratios.

If someone qualifies for a short payout, can we do the loan through
Rural Development?
Refinancing is not allowed except to pick up a debt already owed by the customer to RD.

Is the 2% in reference to the EMD?
Again, I’m not familiar with “EMD. The 2% is a one time guarantee fee (sometimes
referred to by lenders as a “funding fee”). It is similar to the fee charged by VA, only
ours is less.

How do we find CAIVRS numbers?
A non-FHA-approved lender or non-HUD Federal agency CAIVRS user
accesses the CAIVRS Credit Alert System, a delinquent Federal borrower’s
database, to pre-screen loan applicants' creditworthiness. Each non-FHA lender
must request at least one Application Coordinator User ID as well as a Standard
User ID for each individual user.

Go to:
Click “Registration for Lender User ID”
The following page will appear with the following instructions:
To apply for an Application Coordinator ID (Note: You need at least one
Application Coordinator User ID), check the "Coordinator" radio button, fill out
the form below, and click Send Application. Upon verification of the information,
an ID will be assigned and mailed to the CEO of your organization. The
password will not be disclosed, so make sure you remember it!!!
To apply for a Standard User ID, check the "User" radio button, fill out the form
below and click Send Application. Upon verification of the information below, a
User ID will be assigned. The “Application Coordinator” of your organization will
retrieve the User ID.
The password will not be disclosed, so make sure you remember it!!!
Complete the form and submit.
Complete on-line standard “User” ID form and click “Send Application”
Follow additional on screen instructions.
I have a complete set of instructions. Let me know if the above is insufficient. It
is critical that you first set up your coordinator.

How do you know if a loan has already been run through GUS before
we receive the loan?
I’m not sure who “we” is. Lenders may give pre-qualification authority to certain
employees who are not underwriters. But the “final submit” authority should be given to
only those staff that will make sure the loan is properly underwritten before submission to
RD. Nothing should be sent to RD until the loan is completely underwritten, either using
GUS as a tool, or manually. RD can view GUS to see a list of loans with preliminary
review and those with ‘final submit’. Files received at RD are checked against GUS.
The GUS findings and other information can be viewed by RD.

Is there a delay or hold at funding for the guarantee?

Does this session qualify for Continuing Education under Fed licensing?
Presently no. We are working on that. The sessions I conduct at the FAMB convention
do qualify. One of them is almost identical to this one so I do not foresee a problem with
this. Classes conducted in some of the other states may qualify.

Is there training available for GUS?

Yes! Thanks for asking. One of our national office team members, Kris Zehr, is a super
instructor. She conducts a series of GUS seminars. Each is for an hour or less. A
calendar of available training and registration for training can be viewed at WebEx. Each
registration represents access to one phone line. In order to accommodate multiple
locations users must log into the training center and register for the training on an
individual basis. Follow these steps to register for training:
    1. Log onto:
    2. Select “Training Center”
    3. Select the “Upcoming” tab to view a calendar of scheduled “Get to Know GUS”
    4. Select “Register” and complete the required fields.
    5. A confirmation email will be sent to the registered participant. Course materials
        will be emailed prior to training.
    6. Attendance spreadsheets will be provided to record participants.

Well and septic – if a property is already occupied, do you still need a
water test?
Yes, just because they live there doesn’t mean that the water is safe. Test to meet local or
state code. Most counties in FL require only the bacteria test.

Husband – 635, wife – 619, do they get streamlined processing?
Only for him. You must document any credit glitches for her.

What is the contact name for Florida Housing Finance? IRS and HUD
say can’t do advance payment, but say some non-profits can – must be
FHF. This first time homebuyer credit is a nightmare!
Indeed. But the State of Florida is working on that through the Florida Housing Finance
Corporation and that will ultimately be worked through the counties, like the SHIPP
program. I have seen a draft copy but do not know if a final version has been released.
Go to the web for FHFC contacts, In
addition, I’ve heard that some cities have already implemented the program. Check with
all resources in your area. Also see the HUD mortgagee Letter 2009-15, “Using First-
Time Homebuyer Tax Credits For The Down payment”

What is the maximum CLTV if the borrower is obtaining subordinate
No limit. However, I’ve heard that some other secondary market entities, such as Fannie
Mae, may have a cap. If the subordinate financing is a loan, any payment must be
included in the ratios.

Where do we get the rate?
Lenders establish the rate and include it on the rate sheet. It is capped at the Fannie 30-yr
fixed 90-90 plus .6 OR the lender’s VA par rate, whichever is greater.

Clarify bankruptcy time frames – how long do they have to be out?
The underwriter can consider recently discharged bankruptcy if the circumstances were
beyond the customer’s control, the circumstances have been removed, and are not likely
to reoccur. The time frames were given in an earlier answer. Keep in mind, those time
frames do not need to be the sudden death of the application.

Can the USDA loan approval be based on the contingent to the selling of
a borrower’s existing home?
Yes. In addition, RD has provisions that allow customers to retain their present home if
their employment relocates them in from outside the local commuting area. A new lease
will not be counted in income but any outstanding payments must be including in the
ratios. They are not eligible if they own a suitable decent, safe, sanitary home in the local
commuting area. They may retain the local property if it is functionally inadequate or is
not decent, safe, or sanitary. Income from a 1-yr signed leave where a security deposit
and first month’s rent has been collected, can be included in income after using a 25%
reduction for potential vacancy.

Can domestic partners constitute a USDA household for qualification
purposes? (Of course, their income would be added together to see if
they meet income limits.)
Yes, anyone can join together to make application if they meet the general eligibility
criteria. Our definition refers to "persons", and no reference is made to being married,
blood relatives, etc. It is the same as conventional financing in this regard.

"Household or family. The applicant, co-applicant, and all other persons who will make
the applicant's dwelling their primary residence for all or part of the next 12 months. The

temporary absence of a child from the home due to placement in foster care shall not be
taken into account in considering family composition and size. Foster children placed in
the borrower's home and live-in aides shall not be counted as members of the household."

Our customers have 20% for a down payment. Do they qualify for the
RD loan?

RD does not have a policy that says a GRH applicant is ineligible if they can come up
with a 20% down payment. Yet almost daily I hear from lenders that bring this statement
into the perimeters when asking a question on eligibility: “The customer does not have
20% down.” Many lenders think that the customer is not eligible if they can possibly put
down the 20%. They tell me that “RD” told them that. Yes, some of my old publications
years ago said that. Policies change. This is one of them.

It is not RD’s job to determine whether or not the customer can qualify for a loan without
the guarantee. The lender makes that decision when they sign the Form 1980-21. There
could be many valid reasons why the customer could not easily obtain the conventional
loan. Never put a customer into a loan where mortgage insurance is required.

Cash reserves are a good thing. Equity in real estate is a good thing. Other assets are a
good thing.

A water test came back as potable water however high in iron. The
underwriter determined that the test failed (not eligible for RD).

The well water must conform to local code (or state if there is no local code). In Florida,
each county has minimum well water standards. Typically they require only the E-Coli
test but some counties may require more comprehensive tests and perhaps require
abatement of the “iron” problem. Abatement equipment can be financed into the loan if
necessary and if the appraisal supports it. The FHA appraiser must consider this problem
and similar situations in the appraisal value/report.

In Florida, must the debts of a non-purchasing spouse be included in
qualifying totals with the purchasing spouse (for loan qualification, not
total income eligibility)?

No. This is an example where the loan officer can offer homeowner education or
recommend professional homeowner education. If the spouse or other adult has no
income the question begs: If there is no or limited cash reserves and the ratios are tight,
how will the other debts be paid?

I have a borrower who has a car loan – his daughter could not get the
loan- so he put it in his name. If he can prove 12 months of payments
that she has made, can we exclude that from his debt?

Yes. That would be the answer for other co-signed debts.