[Federal Register: November 2, 2009 (Volume 74, Number 210)]
[Notices]
[Page 56571-56572]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no09-10]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Notice of Funding Availability for Refinance Assistance Under the
American Recovery and Reinvestment Act of 2009--Section 502 Guaranteed
Loan Program
AGENCY: Rural Housing Service, USDA.
ACTION: Notice.
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SUMMARY: This notice announces the Agency intent to prioritize $400
million in funding that was previously made available in the Federal
Register on July 23, 2009, for the refinance program to achieve the
maximum amount of debt relief to existing borrowers and keep the
borrowers in their homes, thereby, achieving long-term financial
stability consistent with the goals of the Recovery Act. Additional
requirements for such refinancing will ensure that existing borrowers
are achieving measureable financial savings in refinancing and that
Recovery Act funds are spent wisely and have transparent results.
FOR FURTHER INFORMATION CONTACT: Debra Terrell, Senior Loan Specialist,
Section 502 Guaranteed Loan Program--STOP 0784 (Room 2250), U.S.
Department of Agriculture, Rural Housing Service, 1400 Independence
Ave., SW., Washington, DC 20250-0784, telephone number 918-534-3254, or
by e-mail at debra.terrell@wdc.usda.gov.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The paperwork burden has been cleared by the Office of Management
and Budget (OMB) under OMB control number 0575-0078.
Overview
The Rural Housing Service, an agency within the USDA Rural
Development mission area, provides housing loan guarantees to lenders
of rural residents through its Section 502 Guaranteed Loan Program.
USDA Rural Development (hereinafter referred to as the ``Agency'')
offers assistance to refinance existing Section 502 Direct and
Guaranteed Loan Program borrowers with Section 502 Guaranteed Loans
when restructuring achieves more favorable loan terms.
USDA Rural Development's Section 502 Guaranteed Loan Program is
making $400 million available under the Recovery Act for refinancing
Section 502 Direct and Guaranteed Loan Program borrowers with Section
502 Guaranteed Loans. Utilization of funds from the Recovery Act for
refinancing existing Section 502 Guaranteed and/or Direct Loan Program
borrowers can assist responsible homeowners reduce their overall
monthly debt by achieving more favorable affordable terms, increasing
household cash flow, lowering the cost of ownership and benefit the
economy by employing mortgage partners associated with the mortgage
loan process. These funds will be made available on a first-come-first-
served basis for refinance requests meeting the existing application
and approval procedures based upon Section 502(h)(14) of the Housing
Act of 1949, as amended, with the addition of the policy changes noted
in this. Existing procedures include those in 7 CFR part 1980, subpart
D. To the extent of any inconsistency, the provisions of this notice
will prevail.
USDA Rural Development intends to modify and clarify policy
regarding the refinancing of existing Section 502 Direct or Guaranteed
Loan Program borrowers (herein referred to as ``borrowers'') with
Recovery Act funds. Refinancing, with Recovery Act funds, is intended
to help those borrowers who are seeking to achieve more favorable loan
terms by transferring the financing arrangement to another approved
guaranteed lender, modifying the loan type, or restructuring the
repayment obligation with the present guaranteed lender. Modification
and clarification of policy is intended to strengthen and support USDA
Rural Development's obligation to protect its existing Section 502
portfolio. The Agency is considering adopting these program
improvements in its permanent refinance program (using annual
appropriations) to address increased risk and costs to the Government.
Specifically, under this notice the agency will require the
interest rate of the new loan to be 100 basis points below the rate of
the existing loan to be refinanced. This change will ensure the
monetary benefit of refinancing to low or moderate income borrowers
served by the program and achieve the investment goals of the Recovery
Act. Eligible closing costs and other fees charged by the lender have
been identified specifically, rather than relying upon a ``reasonable
and customary'' test. This is intended to reduce excessive closing
costs and other fees charged the borrower that can eliminate the
benefit of the refinance. To reduce risk to the Government the
streamlined refinance feature has been modified to limit the new
financing to the amount of the original loan. Streamlined refinance
under this does not require obtaining a new appraisal, so homeowner
recovery can begin more quickly as intended by the Recovery Act. This
notice also expands upon and clarifies borrower qualification
requirements when there is a change of borrower(s) and emphasizes the
necessity of responsible homeownership in connection with repayment
history. Existing borrowers seeking to refinance their Section 502
mortgage loan under this notice must have demonstrated their ability to
meet payment demands by maintaining a current account for the 180 days
prior to application.
Only approved lenders, as prescribed in 7 CFR 1980.309 are eligible
to participate in the Section 502 Guaranteed Loan Program. Approved
lenders may utilize the services of agents for processing refinance
loans described in this notice. Approved lenders are responsible for
loan underwriting and the action of any agent they may employ or hold a
business relationship with. Rural Development will issue the
conditional commitment to the approved lender if all eligibility
requirements are met.
All funds appropriated in the Recovery Act are available for
obligation no later than September 30, 2010. Funding provided through
the Recovery Act is one-time funding. Under Section 1604 of the
Recovery Act, none of the funds made available under the Recovery Act
may be used for any casino or other gambling related establishment,
aquarium, zoo, golf course or swimming pool. In implementing this
prohibition, the Agency specifically will not finance dwellings with
swimming pools.
General Description of Assistance
Under the Section 502 Guaranteed Loan Program's Refinance program,
an approved lender may refinance an existing Section 502 Direct and/or
Guaranteed Loan Program borrower with a Section 502 Guaranteed Loan. A
refinance must achieve more favorable loan terms. The intent of the
assistance is to give borrowers with satisfactory payment histories the
opportunity to benefit from a lower interest rate and increase their
ability to be successful homeowners. Two options for refinancing can be
offered under this:
1. Streamlined refinance. Lenders may offer a streamlined refinance
without obtaining a new appraisal. The lender will pay off the
principal balance
[[Page 56572]]
of the existing Section 502 Guaranteed or Direct loan. The new loan
amount cannot exceed the original loan amount and cannot include any
accrued interest, closing costs or lender fees. The refinance guarantee
fee (.5 percent of the loan amount) can be included in the loan to be
refinanced only to the extent financing does not exceed the original
loan amount. Except for the appraisal waiver, all other costs,
documentation and underwriting requirements remain the same for
guaranteed loan processing.
2. Non-streamlined refinance. Lenders may offer non-streamlined
refinances (with an appraisal). The new loan may include the principal
and interest of the existing Agency loan, closing costs, lender fees,
and the guarantee fee (.5 percent of the loan amount) to the extent
there is sufficient equity in the property, as determined by an
appraisal.
Loan Purpose, Term and Limitations
In addition to 7 CFR part 1980, subpart D the following loan
purpose, terms and limitations must be met to be eligible to refinance
an existing Agency loan with a Section 502 Guaranteed Loan under this
notice:
1. The rate of the new loan must be at least 100 basis points below
the original rate of the loan refinanced.
2. No new appraisal is required for streamlined refinances
described in this notice.
3. For non-streamlined refinances, a new and current appraisal is
required when 12 months or greater from the original date of loan has
expired or whenever the refinance loan exceeds the existing principal
balance of the original loan.
4. Customary and reasonable closing costs and other fees may be
collected from the borrower by the lender. Such charges may not exceed
the cost paid by the lender or charged to the lender by the service
provider. Excessive fees are not permitted. Examples of customary and
reasonable fees and charges are: The actual cost of the appraisal,
inspection, credit reports, imposed verification charges, title
examination and title insurance fees, attorney fees, settlement fees,
recording fees, taxes, test or treatment fees, and/or courier/wire/
notary fees as long as the service provider is not an employee of the
lender. Document preparation fees may only be charged if the documents
are prepared by a third party not controlled by the lender. The lender
may not charge document preparation fees if it prepares documents
itself. An origination fee of up to 1 percent, based upon the combined
total of the loan amount to be refinanced, can be charged to the
borrower. Lock in/rate locks represent other fees and charges and may
be assessed to the borrower, but are not considered closing costs.
Discount points paid representing application processing fees or broker
fees cannot be assessed to the borrower.
5. Discount points may be financed in connection with a non-
streamlined refinancing when the existing borrower's adjusted household
income is at or below low income adjusted income limits, as determined
by 7 CFR part 1980, subpart D. Discount points financed will not exceed
two percentage points of the loan amount. See http://
eligibility.sc.egov.usda.gov/to electronically confirm the existing
borrower's adjusted household income. Select Guaranteed from the
navigation menu under Income Limits.
Borrower Qualifications
Borrowers must meet program requirements in 7 CFR part 1980,
subpart D to be eligible for a refinance loan through the Section 502
Guaranteed Loan Program. In addition:
1. Borrower(s) on the existing promissory note must be identical to
the borrower(s) on the new promissory note, except if one or more of
the borrowers have died, or if the borrowers have divorced. If a
borrower intends to relinquish their interest, the remaining
borrower(s) must be eligible for the new loan and demonstrate repayment
ability without assistance of the departing/departed borrower.
2. The borrower must have been current on their Section 502 loan
for the 180 days prior to loan application. Any late payments in the
past 36 months must be considered in the underwriting analysis. The
permanent loan file for the new loan must contain documented evidence
that the payment history requirements have been met according to 7 CFR
1980.345.
Dated: October 20, 2009.
Tammye Trevi[ntilde]o,
Administrator, Rural Housing Service.
[FR Doc. E9-26269 Filed 10-30-09; 8:45 am]
BILLING CODE 3410-XV-P