The U.S. Department of Agriculture (“USDA” or “Agency”) has announced upcoming revisions to Chapter 12, Property and Appraisal Requirements, of the Single Family Housing Guaranteed Loan Program Technical Handbook (“HB-1-3555”). The updates will be effective on April 1, 2024, as published in an advanced notice available on the LINC Training Library webpage.
The notable updates in each Section are indicated below as excerpted from the advanced notice:
Chapter 12 – Property and Appraisal Requirements
- Paragraph 12.4, Site Requirements for Accessory Dwelling Unit, has been expanded to state that design features that do not have a separate address or independent utilities are not restricted if they function in support of only household members and are not designed to create rental income. Also, an appraiser must document the highest and best use of a property, considering all property characteristics, including the state of the utilities.
- Paragraph 12.4, Income-Producing Land, states that land that is primarily used to produce income, if not eligible. Clarification is added to explain that residential properties with a minimal income producing feature, such as a billboard or cell phone tower, are allowed.
- Paragraph 12.5, Residential Appraisal Reports – Photographs, was revised with additional language added to the photography requirements. Basement photos must include all finished and unfinished rooms. Attics and crawl space photos must be provided if the area can be safely accessed without disturbing or moving items that obstruct visibility. For manufactured homes, photos are required for the HUD Data Plate and HUD Certification Labels.
- Paragraph 12.9(B), New Dwellings, was updated to state that one year builder warranties are acceptable by the USDA when: the policy is non-refundable or cancellable; the policy is from an insurance company licensed to do business in the state where the property is located; and coverage includes at least one year for any defects cause by faulty workmanship or defective materials. Additionally, new construction sections are added with requirements for new constructions certified plans and specifications for stick build homes, evidence of construction inspections for stick build homes, evidence of thermal standards for new construction stick built homes, and evidence of construction inspections for manufactured homes.
- Paragraph 12.12, Single-Close Features for Construction to Permanent Loans, has a new requirement for renters included. If an applicant is renting, the rent payment may be excluded from the total debt ratio if the lender obtain documentation verifying the applicant will no longer be liable for the rental payment once the home under construction is completed.
- Attachment 12-C, Construction Project Review, has updates to an optional checklist that lists requirements for a Single Close Construction loan product, including a note that a lender may use optional Form RD 1924-25 or another optional source to document the necessary information.
DocMagic will continue to provide USDA updates as they become available. If you have additional questions about this topic, please contact DocMagic’s Compliance Department.
