SINGLE FAMILY HOUSING PROGRAM SUMMARY
Summary of Direct Low
and Very Low Income Loans.
These loans are referenced in the Federal Register as Section 502
loans. (This information includes individual loans for the Self-Help
Housing Program.)
Salient Facts
Applicant
eligibility is based on:
1. Applicant meets basic eligibility
criteria, such as citizenship, unable to obtain conventional financing, etc.
2. Good credit history, with few
exceptions granted on a case by case basis.
3. The total adjusted income of all
adults living in the home is within the HUD Max Income Limits which pertains to
the county where the family will reside.
4. Applicants are considered very low
income when their total adjusted income is below 50% of adjusted median income
level and low when the total adjusted income is below 80% of the adjusted
median income level for their respective counties.
5. Applicants have ratios of 29%
Principal, Interest, Taxes and Insurance (PITI) and Total Debt (TD) ratio of
41% for very low income applicants, PITI of 33% and TD of 41% for low income
applicants.
6. Very Low income families can
obtain subsidies to lower their monthly installment.
7. Meet all other requirements in
Handbook 3550 Instruction.
Interest
Rates and Terms:
Rates vary depending on
the applicants income. If they are eligible for
subsidy then the rate is based on an effective rate that can go as low as 1%.
Subsidies are subject to recapture.
Unsubsidized rates
change periodically.
Normally, loans are 33
years and have a fixed interest rate.
Security
Lien Positions:
Rural Housing Service
(Rural Development) will subordinate to a leverage lender. Otherwise, we
require a first lien position.
Down payment
Requirements:
Generally no down
payments are required. However, in some instance the applicant is able to make
a down payment. If they can obtain a conventional loan by pledging the down
payment to the bank, they will not be eligible for our financing.
Summary of Guaranteed
Housing Loans. These are also referenced in the Federal Register as Section 502 Guaranteed Loans.
SALIENT
FACTS
Rural Development can
guarantee loans submitted only by Guaranteed Approved
Lenders with an active "Lender Participation
Agreement." The lender originates and
services the loan. Loans are generally sold to the secondary market.
Processing steps are:
1. Potential applicant contacts the
lender.
2. Lender submits a request for a
"reservation of funds" to RD local offices.
3. Lender assembles the loan
information from the applicant.
4. Loan package goes to the approved
lender's underwriter.
5. Lender submits the loan package to
Rural Development for review.
6. Rural Development issues a
Conditional Commitment for Guarantee.
7. Lender is authorized to close the
loan according to the conditions of Rural Development and the lenders underwriter.
8. Lender submits evidence of closing
and 2% guarantee fee. The fee is nonrefundable and 2% of the amount of the
loan.
9. Rural Development issue's the LOAN
NOTE GUARANTEE.
Applicant Eligibility:
1. The total adjusted annual income
must be within the HUD limits that pertain to the county where the family will
reside. Incomes must be within 60% and 115% of the median income.
2. Principal, Interest, Taxes and
Insurance (PITI) ratios not to exceed 29% and Total Debt ratio not to exceed
41% of gross monthly income.
3. Applicant is not able to obtain
the loan with out the guarantee.
4. Applicant must have a good credit
history with few exceptions on a case by case basis.
5. Property must be in an area
defined as "rural".
6. Meet all other requirements
outlined in 1980-D Instructions.
Rates and
terms:
NO Adjustable Rate
Mortgages.
Rates are negotiable
between the applicant and lender. However, the interest rate cannot exceed the
"higher" of the lender's published rate for VA first mortgage loans
or Fannie Mae rate of 6/10's of 1% on a 90 day delivery.
Terms are, generally 30
years.
Maximum Loan
Amounts:
The applicants
repayment ability determines the maximum loan amount.
Refinance Option:
USDA - Rural Housing Service has been given authority that allows approved
lenders to refinance existing Guaranteed Rural Housing Loans. The
Guaranteed Rural Housing Loan fee is .5%. Administrative Notice (AN) No.
3774 (1980-D) provides guidance on the refinance option. All
Administrative Notices may be retrieved from the RHS Website: www.rurdev.usda.gov. Click on the
Regulations icon.
Summary of Repair Loans and Grants referenced in the Federal Register as Section 504 Loans
and Grants.
SALIENT
FACTS
1. Grants are limited to individuals
that are 62 years and older that do not have the repayment ability for a loan.
2. Applicants must show evidence of
ownership (tax notices, deeds, etc).
3. Grants are limited to a $7,500
life time limit.
4. Outstanding balance of loans
cannot exceed $20,000.
5. Interest rates on loans are 1%
with a term not to exceed 20 years.
6. Loans are processed under the same
criteria as direct Single Family Housing loans.
7. Grants can only be for the purpose
of removing health/safety hazards and make homes accessible for people with
disabilities.
8. Loans may be used to make general
repairs to improve or modernize the property as long as the dwelling remains
modest.
9. Applicants for loans/grants must
be very low income families.
10. Applications are processed in the local field offices.
NOTE: See attachment 12-A of HB-1-3550 for comparisons between
repair loans and repair grants.
Summary of the Mutual Self-Help Program
SALIENT
FACTS
1. Technical Assistance (TA) Grants
are given to NON-PROFIT organizations to administer the self help program.
2. The Grantee receives approximately
$10,000 - $15,000 per home to provide the supervision and technical assistance
for individual families to build their own homes. The average TA cost
equivalent per unit cannot exceed 15% of the value of a modest home in the
area.
3. If the Grantee does not have the
financial resources to develop a complete application they can apply for a
$10,000 pre-development grant. Grantees have 6 months to assemble a complete
application.
4. Rural Community Assistance
Corporation (RCAC) provides technical assistance to Grantee in both developing
the application and administering the grant.
5. Individual families obtain their
construction and permanent financing through the Direct
loan program.
6. Families must commit to the
construction of at least 65% of the home and 35% can then be subcontracted.
7. Individual families are required
to put in 30 hours per week labor.
8. Five to 10 homes are built at a
time.
9. Eligibility requirements for the
loan are processed by the local field offices and loans are processed in
accordance with the Direct Loan instruction, Handbook 3550.
10. Families are not required to have previous construction experience.
They are trained on the job and in group meetings.
11. Typically construction is completed within 9 to 12 months.
12. Sweat-equity equals approximately 10%.
13. Program is available for both low and very low income
individuals/families.
14. Technical Assistance Grants must be approved by the National Office if
they exceed $300,000.
Summary of Site Loans referenced in the
Federal Register as 523 and 524 loans.
SALIENT
FACTS
1. Loans must be made to
private/public NON-PROFIT organizations.
2. 523 loans are to purchase sites
for homes built under the Self Help Housing Program.
3. 524 loans are to purchase sites
which have no limitation as to the method of construction.
4. 523 loans are at 3% interest where as 524 loans are at the normal rate of
Direct loans.
5. State Directors loan approval
authority is $100,000. However, loans that exceed the State Directors limit
must be approved at the National Office. No limits are published on the amount
of the loans.
6. The term is very short. Normally
set up for a two year pay back, as lots are sold.
7. Lots can be sold to low, very low
and moderate income families.
8. Funding is controlled at the
National Office, however, these funds are not
generally fully utilized. REMEMBER, FUNDING AVAILABILITY IS GOOD.
9. Loans are secured by a mortgage on
the land.
10. Closing instructions must be issued by the Rural Development's Office
of General Counsel.
Summary Of Special Incentive
Programs:
A. Rural Housing Loan Partnership (RHLP)
Incentive:
This program allows
USDA Rural Development to access additional funds (75%) from the National
Office reserves. RD uses 25% of the loan funds from the states annual
allocation and the national offices provides the other
75% of the loan.
The
criteria for accessing these funds are:
1. A non-profit submits a proposal to
Rural Development that shows they have financial commitments from Leveraged
Lenders, Federal Home Loan Bank, Community Development Corporations, State grant money from sources similar to the Olene Walker Trust Fund, Community Development Block Grants,
Fannie Mae, etc, for the development of low/very low income families.
2. Loan funds are obligated for
eligible "Direct loan" applicants.
3. Loan funds are obligated within
the fiscal year of obtaining authorization for the RHLP loan.
The main idea is to
develop an affordable loan package, utilizing partnerships with other funding
resources to provide affordable housing in rural
B. Rural
Housing Demonstration Program
1. Special National Office Reserve
money can be obtained to construct homes that are designed with criteria that
do not meet Rural Developments present construction standards.
2. All proposals must be submitted
and approved by the National Office.
3. Projects have to be supported by
evidence of feasibility and cost efficiency.
