Rural Housing Service Clarifies Eligibility Guidelines for Refinancing
by Anna DeSimone
President & Founder
The Rural Housing Service (RHS) published Announcement #4635 on April 2, 2012 to provide updated instructions regarding the refinance feature of the Single Family Housing Guaranteed Loan Program (SFHGLP). The objective of the refinance feature is to assist responsible homeowners in achieving more favorable terms by transferring their present financing arrangement with a new repayment obligation.
Borrowers who have a satisfactory payment history have the opportunity to benefit from a lower interest rate. Approved lenders may refinance an existing Section 502 Direct or Guaranteed borrower with a Section 502 Guaranteed loan. Funds will be made available on a first-come, first-serve basis for refinance requests meeting application and approval criteria outlined in the announcement.
Existing Section 502 Direct and Guaranteed borrowers who meet the eligibility requirements of RD Instruction 1980-D, supplemented by the notice may utilize the refinance feature of the SFHGLP. The Announcement replaces AN 4549 (1980-D) issued January 19, 2011. This issuance removes the requirement to confirm the property continues to meet HUD Handbooks 4150.2 and 4905.1 as provided in an earlier issue.
In accordance with RD Instruction 1980-D, and Section 502(h) of the Housing Act of 1949, the SFHGLP may offer assistance to refinance existing Section 502 Direct and Guaranteed loan program borrowers with Section 502 guaranteed loans. Funding for loan guarantees is achieved with an annual commitment authority from the Agricultural Appropriations Bill authorized by the President.
Non-streamlined refinance
The non-streamlined refinance option requires an appraisal. Lenders offering the non-streamlined refinance option may include in the loan the principal and interest of the existing loan, closing costs, lender fees and the current guarantee fee to the extent sufficient equity in the property exists, as determined by an appraisal. The appraised value may be exceeded only to the amount financing represents the prevailing guarantee fee. The Guaranteed Underwriting System (GUS) may be utilized when requesting a non-streamlined refinance. This loan is subject to an annual fee, which when computed monthly, the 1/12 portion of the annual fee shall be included in the principal, interest, taxes and insurance (PITI) calculation.
Streamlined refinance
Lenders may offer a streamlined refinance without obtaining a new appraisal. All other costs, documentation and underwriting requirements remain consistent with a purchase guarantee, unless otherwise noted in this AN. With this option, the lender will refinance the principal balance of the existing Section 502 Guaranteed loan. This option is not available for Section 502 Direct loans. The loan amount cannot exceed the principal amount of the existing loan refinanced plus the one time guarantee fee. Accrued interest, closing costs or lender fees cannot be financed with this option. Lenders must manually underwrite this refinance option. GUS may not be utilized when requesting a streamlined refinance. This loan is subject to an annual fee, which when computed monthly, the 1/12 portion of the annual fee shall be included in the PITI calculation.
Refinance Product Matrix
The attached matrix outlines the refinance features of the SFHGLP. General eligibility, approval and delivery criteria are noted under the Direct and Guaranteed columns of the attached matrix. The matrix is intended to assist all parties involved in offering the refinance feature of the SFHGLP with eligibility, approval and loan note delivery guidance.
Click on the following AllRegs link to view the matrix:
http://www.allregs.com/ao/main.aspx?did2=ffded8ec30484de1b869948ca3b0c95a
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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