Single Family Housing Guaranteed Loan Program Guaranteed Loan Training

1. Single Family Housing Guaranteed Loan ProgramGuaranteed LoanTraining FY 2012

2. WELCOME • This training is a comprehensive overview of the Single Family Housing Guaranteed Loan Program. • If you are taking the training as a mandatory requirement, it is your responsibility to report your completion to your company’s contact. • Course materials are available to download/print for future reference.

3. WELCOME • The executor of your company’s approved lender’s agreement (Form RD 1980-16) must sign a master attendance sheet (available online at USDA LINC) and return it to either the National Office or the State Office that sent your company their pre-approval letter.

4. WELCOME • When all necessary application materials have been received and reviewed, Rural Development will notify your company of their approval status for the Guaranteed Loan Program.

5. Training Tools • RD Instruction 1980-D • Section references • Example: 1980.345(d)(1)(i)

6. Training Tools • Titles with *indicate an Administrative Notice was published on this topic. • Titles with *indicate a ListServ Notice was published on this topic. • This training is not all inclusive. Please refer to RD Instruction 1980-D, Administrative Notices, Unnumbered Letters, and all other published guidance.

7. Program Mission 1980.301(b) • Serve low to moderate income rural homebuyers • Adequate, modest, decent, safe and sanitary dwellings • Guarantee sound loans which otherwise would not be made without a guarantee

8. Single Family Housing Guaranteed Loans How can lenders offer Guaranteed Loans? • Become an approved lender* • Form RD 1980-16 Approved Lender Agreement • Be an approved lender with Fannie Mae, Freddie Mac, HUD, VA, State Housing Finance Agency. Farm Credit Service, or participate in other guaranteed loan programs (i.e. Rural Business, Utilities, and/or Farm Service Agency) • Additional eligibility criteria applies • National or state approved status available

9. Single Family Housing Guaranteed Loans How can lenders offer Guaranteed Loans? • Work with an approved lender • Submit originated loan files to an approved lender for underwriting • Refer to the approved lender for potential overlays/guidelines (i.e. minimum FICO scores, documentation requirements, property type restrictions, etc.)

10. Single Family Housing Guaranteed Loans Who is not eligible to become an approved lender?* • HUD Loan Correspondents • VA Agents • Freddie Mac Third Party Originators (TPO) • Mortgage Brokers These lenders must find an approved lender to work with in order to originate Guaranteed loans.

11. Guaranteed Loan Benefits! • No downpayment required, 100% financing • No pre-determined purchase price limits • Expanded qualifying ratios, 29/41 • Fixed, 30 year interest rates • No reserve requirements • Nontraditional credit accepted • Eligible gift/grant/MCC’s/Buydowns allowed • Not limited to first time homebuyers

12. Guaranteed Loan Benefits! 90% Loan Note Guarantee! Original principal loan amount: $150,000 Maximum loss claim payout: $135,000 1980.322(a)(2): Any loss sustained by the Lender of an amount up to 35 percent of the principal amount actually advanced to the borrower, plus 85 percent of any additional loss sustained by the Lender of an amount up to the remaining 65 percent of the principal amount actually advanced to the borrower.

13. Applicant Eligibility

14. 1980.346 “Other eligibility criteria”: The applicant must: (a) Be a person who does not own a dwelling in the local commuting area or owns a dwelling which is not structurally sound, functionally adequate. Applicant Eligibility

15. The applicant cannot: Own a home in the local commuting area IF a retained home is within local commuting area, must be: Structurally unsound (documented evidence to support) OR Functionally inadequate (handicap accessible/”Brady Bunch” situation, etc.) Applicant Eligibility

16. Reference to 1980.346(a): In regards to the applicant: Can only retain one dwelling along with new GRH loan purchase AND 2. Dwelling retained cannot be financed with a Section 502 Direct or Guaranteed loan Applicant Eligibility*

17. 1980.346 “Other eligibility criteria”: The applicant must: (b): Be without sufficient resources to provide the necessary conventional credit without an RD guarantee upon terms and conditions which the applicant could reasonably be expected to fulfill. Applicant Eligibility*

18. 20% down available: liquid assets (401k not considered) Money available to pay closing costs/lender fees/etc. Ratios not to exceed 28/36 (with 20% downpayment applied) No adverse credit per lender guidelines (i.e. BK/FC previous X years, late mtg/rent payments in previous X months, etc.) Acceptable credit history exists (# and history of tradelines) No private mortgage insurance is required. MUST MEET ALL SIX CRITERIA! FHA and VA are NOT conventional credit. Conventional Credit “Test”*

19. 1980.346 “Other eligibility criteria”: The applicant must: (c): Be a natural person who resides as a U.S. Citizen…, or a noncitizen legally admitted to the U.S. for permanent residence or on definite parole. SAVE mandatory for non U.S. Citizens. “Qualified aliens” may qualify. Applicant Eligibility*

20. 1980.346 “Other eligibility criteria”: The applicant must: (d): Possess legal ability to insure the loan obligation and have reached the legal age of majority in the State or have had disability of minority removed by court action. Applicant Eligibility

21. 1980.346 “Other eligibility criteria”: The applicant must: (e): Have the potential ability to personally occupy the home on a permanent basis…full time college students will not be granted loans unless: Applicant intends to make home their permanent residence and employment prospects are available. An adult member of the household will be available to make inspections if the home is being constructed. Applicant Eligibility

22. ELIGIBLE RURAL PROPERTY SFH residences must be located in an eligible rural area.

23. Nationwide Eligibility Web Site http://eligibility.sc.egov.usda.gov • Property Eligibility • Income Eligibility • Income Limit pdf by state • State Guaranteed Loan Coordinator Contacts

24. Property Eligibility

28. Map an exact address: Eligible

29. Map an exact address: Ineligible

30. Map an exact address: Unable to Determine

37. Eligible Housing Existing homes Must meet HUD Handbooks 4150.2 and 4905.1

38. Eligible Housing Condominiums* Eligible units must have evidence they are approved by: • Fannie Mae or • Freddie Mac or • HUD or • VA

39. Eligible Housing Townhouses/(PUD’s) All PUD’s (attached and detached) are eligible for Guaranteed financing

40. Eligible Housing Modular homes New and existing modular homes are eligible

41. Eligible Housing New Construction* Evidence Required: • Certified plans/specs or building permit • Inspections throughout construction • 1 year builder’s warranty

42. Eligible Housing Manufactured homes* New units: 1980.313(i) • purchase agreement must be dated within one year of the date displayed on the manufacture date of the unit • Built by an approved dealer-contractor (each state maintains a list) Existing units: 1980.313(i)(2)(i) • Must be originally built and financed with a Direct or Guaranteed loan • Original owner must be seller

43. No Income Producing Property • Rental Homes/Second Homes Guaranteed loans are for single family primary residences only. • Large farm service buildings, grain bins, silos, dairy farms, hog barns, equestrian stables/riding arenas, cell phone towers, wind turbines Large farm service buildings are non-essential for RD purposes. Appurtenances that have specific income producing abilities/purposes are ineligible. 1980.311(a)(4) and 1980.313(a).

44. No Income Producing Property • Acreage: non-tillable (farm), no “limit,” 30% site value 30% or more: If typical for area (as verified by appraisal and comps) and the site cannot be subdivided into two or more sites, the 30% limitation may be exceeded. 1980.313(e) 30% and below with no income producing properties = no issue.

45. In-Ground Swimming Pools* States may approve requests: • No loan funds for contributory value of pool • Appraiser must provide accurate value • Above ground pools are personal property, no issues

46. Example: Maximum Loan Amount Calculation w/ In-Ground Pool Appraised Value: $175,000 Pool Value: - $2,500 Maximum loan amount: $172,500 + g fee $172,500 ÷ .98 = $176,020.41 loan amount w/ upfront guarantee fee

47. Income Eligibility Adjusted household income must not exceed the applicable limitation for the state/county where the property is located.

48. Income Eligibility