As in previous years, the United States Department of Agriculture (“USDA”) has posted a bulletin announcing that under the Single-Family Housing Guaranteed Loan Program, there will be a short period of time during the new fiscal year – approximately two weeks – when funding is not available. USDA’s fiscal year 2025 begins on October 1, 2024, and ends on September 30, 2025.
During the period of time when funding is unavailable, Program Directors have no commitment authority. Completed guaranteed loan applications will still be accepted from approved lenders for purchase and refinance loans. Eligible loans will be issued Conditional Commitments “subject to the availability of commitment authority.” Conditional commitments must contain specific language related to funding as lenders assume all the loss default risk until funds become available and the USDA is able to obligate the loan and process a Loan Note Guarantee.
Beginning on October 1, 2024, DocMagic will update the Conditional Commitment for Single-Family Housing Loan Guarantee (Form ID: RD355518.RH) to include an attachment with the following required language until the USDA announces that funding is available for the new fiscal year:
"Funds are not presently available for this Conditional Commitment. The Rural Development-Rural Housing Service (RHS) obligation under this Conditional Commitment is contingent upon the availability of an appropriation from which payment for contract purposes can be made. No legal liability on the part of RHS for any payment on this Conditional Commitment may arise until funds are made available to RHS for this Conditional Commitment and until the Lender receives notice of such availability, to be confirmed in writing by RHS. More specifically, this Conditional Commitment is subject to RHS receiving sufficient funds (in the Program Funds Control System for the Single Family Housing Guaranteed Loan Program for the Type of Assistance and State of application submission) to fund this and all prior eligible outstanding applications in their entirety in the time and date order received. When such funds become available, RHS will notify the lender, and the guarantee process will continue subject to all applicable Agency regulations and conditions set forth in this Conditional Commitment. RHS will not reserve loan funds for applications in process during this timeframe. Lenders may close the loan as scheduled. The lender will assume all risk of loss for the loan until RHS obligates funds and the Loan Note Guarantee is subsequently issued. When the lender requests the Loan Note Guarantee, the lender must certify to the Agency, using the process provided in this commitment, that there have been no adverse changes to the borrower's financial condition since the date the Conditional Commitment was issued by the Agency. The lender will submit the appropriate guarantee fee at the time they request the Loan Note Guarantee. The loan will be subject to an annual fee of 0.35 percent over the average scheduled unpaid principal balance of the loan. The Agency will not be able to issue the Loan Note Guarantee until these conditions are met and funding is obligated."
Additionally, the bulletin advises that the upfront guarantee fee for FY 2025 will remain at 1.00% and the annual fee will remain at 0.35%.
If you have any questions about the information in this article, please see the USDA’s announcement here, or contact DocMagic’s Compliance Department.
