WEBINAR QUESTIONS AND ANSWERS
USDA, RURAL DEVELOPMENT
August 12, 2009
BY
BOB COORDSEN, GUARANTEED HOUSING SPECIALIST
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 loans.
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. http://eligibility.sc.egov.usda.gov We have an excellent guide for using the site posted at www.rurdev.usda.gov/fl/guarrhs.htm
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 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 102.04%.
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: http://eligibility.sc.egov.usda.gov 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 package?
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 restrictions?
A. It is the lender’s responsibility to know the product well enough to council with the customer. Information for individuals is posted at www.rurdev.usda.gov/fl/guarrhs.htm
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 product.
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: https://www.efanniemae.com/sf/refmaterials/hrny/
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 locked.
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 rule?
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
WEBINAR QUESTIONS AND ANSWERS
USDA, RURAL DEVELOPMENT
June 18, 2009
BY
BOB COORDSEN, GUARANTEED HOUSING SPECIALIST
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 www.rurdev.usda.gov/regs Click on the “Administrative Notice” link.
Can a house with a stamped concrete floor instead of carpeting, tile, or wood quality for the program?
Yes.
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 www.rurdev.usda.gov/regs]. 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.
THE TOTAL INCOME CAN BE MUCH HIGHER THAN THE ADJUSTED INCOME LIMITS
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 http://eligibility.sc.egov.usda.gov 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 contract?
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?
No
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 http://eligibility.sc.egov.usda.gov 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 household?
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 coapplicant/coborrower
Can they underwrite directly through USDA? Some underwriters take as much as 60 days to make a determination and have “too many guidelines”.
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 expenses?
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?
Yes
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 www.rurdev.usda.gov/fl Substitute the 2-letter abbreviation of any other state for the “fl”.
BPPR?
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 amount.
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 collector.
All towing and running gear must be removed from the home and the property. Any credits from the dealer must be itemized in the agreement.
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 at www.rurdev.usda.gov/fl/guarrhs.htm
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 dispute?
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 liabilities/collections?
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 www.rurdev.usda.gov/fl/guarrhs.htm 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 P&L.
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 www.rurdev.usda.gov/fl
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 identical.
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 employment.
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: https://entp.hud.gov/caivrs/public/home.html
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?
No
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:
- Log onto: https://rurdev.webex.com
- Select “Training Center”
- Select the “Upcoming” tab to view a calendar of scheduled “Get to Know GUS” trainings.
- Select “Register” and complete the required fields.
- A confirmation email will be sent to the registered participant. Course materials will be emailed prior to training.
- 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, http://www.floridahousing.org/Home/ContactUs/ 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 financing?
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.