The U.S. Department of Agriculture (“USDA”) has announced updates to Chapter 11 of the lender’s handbook (“HB-1-3555”). Ahead of the changes, the USDA published an advanced copy of the revised chapter on the USDA LINC Training and Resource Library, under the Loan Origination tab.
The effective date of the proposed changes will be provided in a future USDA Procedure Notice once the revised chapter is permanently published online.
Chapter 11 applies to Ratio Analysis. Notable changes include:
- Revolving accounts “with no outstanding balance” are not required to be closed when considering Total Debt Ratio.
- Under student loans, new guidance is added for non-fixed payment loans when the “payment is above zero” and “when the payment is zero.”
- For purchase loans that are manually underwritten or receive a GUS recommendation of GUS Refer or Refer with Caution, lenders must document eligible compensating factors to support a debt ratio waiver. “The issuance of the Condition Commitment for a Loan Note Guarantee” constitutes approval of a ratio waiver.
- For refinance loans with a GUS recommendation of Refer, Refer with Caution, or that are not supported by GUS require debt ratio waivers, with supporting documentation. “The issuance of the Condition Commitment for a Loan Note Guarantee” constitutes approval of a ratio waiver.
- For obligations not considered or included in total debt-to-income calculations, the update adds that federal, state, and local taxes are not included in debt-to-income ratios “unless a payment plan is in place.”
As discussed in a prior article, the USDA made changes earlier this year to several other chapters of the handbook and revised Form RD 3555-21, the “Request for Single Family Housing Loan Guarantee.” These updates preceded the opening of the new Guaranteed Underwriting System (“GUS”).
DocMagic will continue to provide updates as they become available. If you have additional questions about this topic, please contact DocMagic’s Compliance Department.
