The U.S. Department of Agriculture - Rural Development (“USDA”) has announced updates to several chapters of the Single Family Housing Guaranteed Loan Program Technical Handbook (“HB-1-3555”).
The recently published Procedural Notice 609 provides updates to Chapters 8, 12, and 15, that became effective on April 1, 2024. The notable updates in each Section are indicated below as excerpted from the USDA announcement:
Chapter 8 – Applicant Characteristics
- All references to the Systematic Alien Verification for Entitlements (“SAVE”) program have been removed from the chapter. Previously, applicant information was entered to verify an applicant’s immigration status or status as a naturalized citizen.
- Clarification has been added to specify that a lender must review and retain documentation of a non-U.S. citizen’s identification to confirm eligibility for the Single Family Housing Guaranteed Loan Program. Eligible applicants must be documented as a U.S. citizen, non-citizen national, or a “qualified alien” as defined under (8 U.S.C. Section 1641.
Chapter 12 – Property and Appraisal Requirements
- Accessory Dwelling Units: Clarification on acceptable physical design features.
- Income Producing Land: Guidance added for eligibility of small income producing features of residential property and how income must be reported.
- Appraisal Reports: Addition to the types of photographs required for documenting basements, attics, and crawlspaces. Also, a requirement was added for the appraisal of a manufactured house to include a photograph of the HUD Data Plate and HUD Certification Label.
- New Dwellings: Updates to provide a more comprehensive overview of requirements for the Single Close Construction process that includes additional information on the required builder warranty, pest inspection, and appraisal. The Project Review guidance in Attachment 12-C was also revised to highlight more information on the Single Close Construction process.
Chapter 15 - Submitting the Application Package
- The FEMA Standard Flood Hazard Determination Form name was updated from 086-0-32 to FF-206-FY-21-116.
- Request for evidence of qualified alien verification at time of submission was removed from the Loan Origination Checklist in Attachment 15-A. In accordance with the changes to Chapter 8, a lender is required to obtain non-U.S. citizenship verification and retain the information in the loan file.
The USDA also released an Advance Notice of changes to HB-1-3555 Chapters 9, 10, and 16. The updates are expected to be effective on May 6, 2024, and can be viewed on the Loan Origination page of the USDA LINC Training and Resource Library. The notable updates in each Section are indicated below as excerpted from the USDA announcement:
Chapter 9 – Income Analysis
- In addition to a verbal verification of employment, written and email verifications are also acceptable within 10 days of loan closing. The confirmation of employment status must include the name and title of the person who completes the verification for the employer.
- Updates made to the list of Federally Mandated Exclusions from Income in Attachment 9-D.
- Clarification added that Social Security benefits can be included in repayment income if it is expected to continue for at least three years.
Chapter 10 – Credit Analysis
- Additions made to the list of non-traditional credit lines to include monthly subscription services, gym memberships, and similar accounts.
Chapter 16 – Closing the Loan and Requesting the Guarantee
- For hazard insurance, the maximum allowed for the deductible is increased to 5% of the total coverage amount, which must be at least equal to the guaranteed value of the improvements or the unpaid principal balance.
- Lenders must be mindful of the applicant’s ability to repay a higher deductible so that it will not cause an undue hardship.
DocMagic will continue to provide USDA updates as they become available. If you have additional questions, please contact DocMagic’s Compliance Department.
