Eligible Versus Prohibited Loan Purposes and Buildings Not Essential for Rural Housing Purposes

1. Eligible Versus Prohibited Loan Purposes and Buildings Not Essential for Rural Housing Purposes Single Family Guaranteed Rural Housing – Oregon 08/01/2011 USDA Rural Development in Oregon is providing this information to clarify AN 4590 and in no manner issuing “state” limitations. USDA is an equal opportunity provider and employer.

2. Why? To become more concise and unified in our delineation of what is essential to the Rural Housing (RH) purpose for a Guaranteed Rural Housing (GRH) loan in order to save time and effort, internally, for our Realtors and our lenders…and ultimately for our borrowers.

3. What? Nothing has changed since USDA Rural Development Instruction 1980-D was first published in 1994… …this is not a new topic but one that needs to be reiterated from time to time.

4. RD AN 4590, Jully22, 2011 Clarification of Outbuildings: “Financing farms, buildings designed or intended for business or commercial enterprises, or income-producing land do not meet the basic fundamental premise of the Single Family Housing Guaranteed Loan Program (SFHGLP).” www.rurdev.usda.gov/SupportDocuments/an4590.pdf

5. How? Others have tried to define what is essential to their needs instead of understanding what is essential for SFHGLP when defining land, building and facilities requirements. We define the characteristics of a property based upon our mission and directives.

6. Others have tried to define it by: • % of sale • Tillable land • Foundation, slab or no-slab • “Common for the Area” • Easily removed • Rural Development stands for rural…right? • Size • Shape • Width of doors • “I don’t plan on using it for income producing purposes” • Contributory value • Hobbies

7. USDA Rural Development Defined Rural Development Community Purpose Dwelling Facilities

8. Rural Development "To increase economic opportunity and improve the quality of life for all rural Americans."

9. Community 1924.104 -- A community includes cities, towns, boroughs, villages, and unincorporated places which have the characteristics of incorporated areas with support services such as shopping, post office, schools, central sewer and water facilities, police and fire protection, hospitals, medical and pharmaceutical facilities, etc., and are easily identifiable as established concentrations of inhabited dwellings and private and public buildings.

10. Purpose • 1980.310 -- GRH Loan Purpose: The purpose of a loan guaranteed under this subpart must be to acquire a completed dwelling and related facilities to be used by the applicant as a primary residence. The loan may be to purchase a new dwelling or an existing dwelling. The guaranteed loan may be for "take out" financing for a loan to construct a new dwelling or improve an existing dwelling when the construction financing is arranged in connection with the loan package. The loan may include funds for the purchase and installation of necessary appliances, energy saving measures, and storm cellars. Incidental expenses for tax monitoring services, architectural, appraisal, survey, environmental, and other technical services may be included. Subject to § 1980.311 of this subpart, eligible loan purposes also include:

11. Dwelling • Primary residence • No income producing potential • Dwelling to value ratio >70% • Decent, safe, and sanitary • Structurally sound, functionally adequate, and in good repair • Special design features or requirements for a disabled person

12. Necessaryrelated Facilitiessuch as: 1980.310 (a) • Garage • Storage shed • Walks • Driveway • Water and/or sewage facilities • Accessible features for the disabled

13. Known Past Training Efforts Since June 2009 • Lender and Realtor Trainings • Specialist Emails • New Designated Area Presentations in Nine Communities • Consistent past State Office Loan Reviews • Area Office Training Sessions • National Lender Trainings

14. ProhibitedPurposes GRH 1980.311(a)(4) Purchase or improvement of income-producing land, or buildings to be used principally for income-producing purposes, or buildings not essential for RH purposes, or to buy or build buildings which are largely or in part specifically designed to accommodate a business or income-producing enterprise.

15. “Essential” Green…is essential and eligible as a loan purpose. Red…is non-essential and therefore not eligible for loan purposes!

16. Old decorative windmill Wind turbine

17. HAM radio tower Cell Phone Tower

18. Carport Pole Barn

19. Detached Garage w/no attached garage Attached Garage w/detached garage

20. Detached Garage Commercial Shop

21. Definition of a Shed Webster’s II New Riverside University Dictionary: Shed; 1. A small structure, either freestanding or attached to a larger structure, used for storage or shelter. 2. A large low building often open on one or more sides.

22. Well Shed Horse Shed

23. A Combined Shed and Garden Combine Shed

24. ProhibitedPurposes (cont’d) GRH 1980.313(a) The property on which the loan is made must be located in a designated rural area as identified in § 1980.312 of this subpart. A nonfarm tract to be purchased or improved with loan funds must not be closely associated with farm service buildings.

25. Chicken Coop Chicken Shed

26. Toy Shed 2-Story Barn

27. Hobby Greenhouse Commercial Greenhouse

28. PreFab Plastic Shed Horse Stable

29. Acreage: SFHGLP does not have a limit on acreage. Instead, we have a maximum 30% land value to total value ratio. There can be exceptions: 1. If the higher ratio is typical for the area 2. Property is not sub-dividable 3. Above 1. & 2. stated in the appraisal report

30. Additional considerations: • Be Proactive: Educate your customers and clients • During the Process: • Ask the question…Do the characteristics of the property meet RH’s purpose? • Lots of photos really help • Accurate appraisal reviews • Retrospectively: review with appraisers

31. Use all tools available: • On-line tools: Google Maps, Title company info, City, State and Federal assessor websites… • Appraisers are your eyes so: • Talk to the appraiser (Direct) • Have the bank talk to the appraiser (GRH) • USDA Rural Development Area Offices • USDA Rural Development State Office

32. Oregon SFH Contact Information State Office:1201 NE Lloyd Blvd., Suite 801Portland, OR 97232(503) 414-3393 Pendleton Office:200 Hailey Ave., Suite 105Pendleton, OR 97801-4143(541) 278-8049 La Grande Office:1901 Adams Ave Suite #1 La Grande, OR 97850 (541)963-4178 ext. 4 • Tangent Office:4077 SW Research Way Corvallis, OR 97333(541) 967-5925 Redmond Office:625 SE Salmon., Suite 5 Redmond, OR 97756-8695 (541) 923-4358 Roseburg Office:2593 NW Kline Str. Roseburg, OR 97471 (541) 673-0136

33. Useful Links • AN 4590: SFHGLP Outbuildings http://www.rurdev.usda.gov/SupportDocuments/an4590.pdf • Guaranteed Rural Housing Handbook 1980 http://www.rurdev.usda.gov/wi/programs/rhs/library/RD-Instruction-1980-D.pdf • Oregon SFH Website: http://www.rurdev.usda.gov/ORsfh.html • National Rural Development Website: http://www.rurdev.usda.gov/rhs • National Website for Instruction, Administrative Notices (policy updates) and non-fillable forms: http://www.rurdev.usda.gov/regs/ • Eligibility Website (income/property/calculator): http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do • On-Line Services Website (electronic fillable forms). Select eforms/browse/#: http://forms.sc.egov.usda.gov/eforms/mainservlet • All Regs: http://www.allregs.com/default.asp

34. If our program doesn’t meet the customer’s needs then maybe these agencies might help: • Farm Service Agency • FHA • Farm Credit • Veteran’s Administration • Small Business Administration USDA is an equal opportunity provider and employer.