Presented by USDA Rural Development SECTION 502 DIRECT

Presented by: USDA Rural Development SECTION 502 DIRECT & GUARANTEED HOME LOANS Overview

USDA RD Has Two (2) Purchase Programs (Fact Sheet line 1) 1) Section 502 Guaranteed Rural Housing (GRH) Loan Program • Network of USDA-Approved Lenders (most ‘big-box’ lenders, many smaller ones, too) • Up to ‘Moderate’ income households (115% of ‘Median’ income for county) • Lender processes & makes the loan • USDA RD ‘guarantees’ the loan (reimburses lender if a loss incurred) • Losses are not paid from taxpayer funds – a Guarantee Fee paid by each borrower funds the program

USDA RD Has Two (2) Purchase Programs (Fact Sheet line 1) 2) Section 502 Direct Housing Loans Program • USDA RD Area Offices located across GA (and across the U. S. ) • Up to ‘Low’ income households (80% of ‘Median’ income for county) • We also have a ‘Very Low’ income category (50% of ‘Median’ income for county) • Agency processes and makes the loans ‘directly’ to eligible applicants • If a loss happens, it comes from taxpayer funds

‘No Down-Payment’ Loans (Fact Sheet line 2) • Both loans are ‘no down-payment’ loans: 100% ‘plus’ Loan-to-Value (LTV); • Appraised value can be exceeded only by: GRH: DIRECT: 1 -time, upfront Guarantee Fee. 1) Escrow deposit, (As of Oct 1, 2016 = 1% of loan) 2) Appraisal fee, 3) Tax service fee 4) Homebuyer Education fee

USDA Rural Development is not FHA (Fact Sheet line 3) USDA Rural Development is a separate Agency with its own regulations and accountability. • Though RD may adopt some FHA guidelines as our own, the Agency does NOT follow FHA guidelines in all matters

Properties in Rural Areas only (line 6) Rural Area Definition: • Open country that is not part of or associated with an urban area • Any town, city or place that is not part of or associated with an urban area and vthat is rural in character with a population <10, 000; or v. Is not contained within a Metropolitan Statistical Area (MSA) and has a serious lack of mortgage credit with a population between 10, 000 -35, 000 (if area was already ‘urban’ before 1990, then max population is 20, 000) • Map of rural area: http: //eligibility. sc. egov. usda. gov/eligibility/welcome. Action. do

All of GA is eligible except areas around: Chattanooga, Dalton, Rome, Atlanta, Gainesville, Athens, Carrollton, Griffin, La. Grange, Columbus, Macon, Augusta, Milledgeville, Albany, Valdosta, Hinesville, Savannah, & Brunswick

Target Customers (line 7) GRH Direct • “Moderate” income households • “Very Low” income households – • Up to 115% of Median Income 50% of Median Income • “Low” income household – 80% of Median Income

Maximum Income Limits (line 11) Both USDA RD programs have Maximum Income Limits for household size: GRH (Moderate is max): DIRECT: (Low is max): http: //www. rurdev. usda. gov/HSFDirect_Income_Limits. html

Primary Home / Other Credit (line 10) • Home being purchased must be the applicant’s Primary residence (no 2 nd/3 rd homes) • Cannot already own adequate home that meets family needs and must: GRH: • Meet test for inability to obtain conventional credit Direct: • Be unable to obtain a loan from other lenders offering reasonable rates/terms (VL applicants automatically meets this)

Repayment Ratios (line 18) GRH • 29/41 manually underwritten loans; Automated system (Guaranteed Underwriting System ‘GUS’) may allow higher DIRECT • 29/41 for Very Low Income Applicants • 33/41 for Low Applicants Exceptions may apply based on compensating factors and high energyefficient homes (Direct)

Maximum Loan Amounts (line 19) GRH: • NO maximum loan amounts. Applicants’ income & repayment ability limits loan amount DIRECT: • House must be ‘modest’, decent, safe & sanitary • Modest is < 2, 000 square feet AND under these dollar amounts • Pilot program under way now. Limits are now 80% of HUD limits – $235, 000 - $287, 000 (previously limits ranged $110, 000 - $160, 000)

Credit History (line 20) DIRECT: GRH: A Tri-Merged Credit Report (TMCR) will be Automated Merged and Residential Mortgage ordered: $25. 00 single/joint. A 'reliable' credit Credit Reports are acceptable. See details in score of 640+ is considered acceptable credit, but Chpt 10. A 'validated' score is required; score Federal Judgments are unacceptable regardless of of 640+ is considered acceptable credit. score. Alternative credit (rent, utilities, phone, etc) Validated: min 2 trade lines open for 12+ may be used if there isn't enough credit to obtain a months when verified rental history obtained; score on the report. 'Reliable' score = 3+ trade 3 trade lines if no rental history. Alt credit lines in the last 24 months open/active 12+ allowed. If <640 and manually underwritten, months. If score <640, see pg '4 -44' for Indicators indicators of unacceptable credit followed: of Unacceptable Credit (to follow):

Credit – Indicators of Unacceptable Credit GRH (manually underwritten loans): • Foreclosure within 3 years: Including pre-foreclosure activity, such as a pre-foreclosure sale or short sale • Chpt 7 Bankruptcy within 3 yrs • Chpt 13 Bankruptcy within 1 yr • Mtg/Rent pmt >30 days late within 1 yr DIRECT: See next page…

Credit – Indicators of Unacceptable Credit DIRECT: • Little or no credit history - mitigated by alternative credit • One installment loan pmt >30 days late within last 12 months • Non-RD debt written off in last 36 months, unless paid in full at least 12 months ago • RD debts that were debt settled in last 36 months, or in debt settlement now • Two revolving loan pmt >30 days late within last 12 months • Delinquency on a federal debt • Foreclosure within last 36 months • Judgment satisfied <12 months ago • Tax liens with no satisfactory arrangement for payment • Applicants w/Federal judgments are never eligible • Two rent/mtg pmts >30 days late in last 2 yrs (if >640, 1 yr) (except if obtained in US Tax court). Cannot be • Collection accts w/irregular pmts or no satisfactory waived. arrangement for pmt • Collection accts paid in full in last 6 months, unless regular pmts made previously • Discharged Bankruptcy: • Chpt 7 in last 3 yrs • Chpt 13 in last 1 yr

Property Type (line 22) Allowed: • Existing • Over 1 -yr old –or • <1 -yr old & previously occupied • New Construction • Recently finished • <1 -yr old & never occupied • Proposed Construction • Certified Plans/Specs & licensed Residential Contractor required

Single-close Construction Loans (line 30) GRH: DIRECT: Have always been able to close construction loan to allow Recently regs were changed to allow Lenders to close Borrower to purchase lot, enter contract with contractor to construction loan & obtain the Loan Note Guarantee build on their lot. After construction/inspections, we before construction begins. After capitalize accrued interest (accrues at subsidized rate) & construction/inspections, they convert loan to permanent loan. Saves on closing Costs – no need for separate construction loan. Realtor fee can now be an itemized cost item for builder & paid at initial loan closing! convert loan to permanent loan. Saves on closing costs no need for separate construction loan.

Loan Application Packagers Assist USDA • • Provide outreach and presence in counties where a Field Office is not located; Help us reach very low-income applicants; Promote the program in underserved areas; Prescreen potential applicants; Counsel potential applicants on how to improve their ability to qualify for a home; Ensure that applications are complete and accompanied by the supporting documentation needed for the Agency’s decision; Give applicants insight into the Agency’s application process and regulations. Packager: Individual who works for a tax-exempt non-profit, certified as USDA Packager & has at least one year of affordable housing loan origination and/or affordable housing counseling experience. Packagers must go through Intermediary for approval & loan application submissions – they review the work before coming to USDA Fee earned: Up to $1, 500 for each closed loan (Intermediary shares this fee)

Section 504 Repair Loans/Grants USDA RD also offers assistance for rural homeowners to repair the home they already own. Must be under Very-Low Income limit Grants up to $7, 500 • For owners 62 and older to remove Health & Safety Hazards • Must show lack of repayment for Loans up to $20, 000 at 1% rate for up to 20 year for modernizing/repairing home • Do not have to be elderly • $4. 60/month per $1, 000 borrowed (20 yr term)

Contact Us (lines 37 & 39) DIRECT: GRH: • The GRH Staff is separate from the Direct loan staff at right. Please submit questions to this email Inbox. It is checked daily. Have UNDERWRITER answer questions for Originators/Processors. • ra. gagrh@ga. usda. gov Cartersville: 770 -386 -3393; X 100 Clarkesville: 706 -754 -6239; X 4 Ft Valley: 478 -827 -0016; X 4 Sandersville: 478 -552 -0901; X 4 Camilla: 229 -336 -0371; X 4 Douglas: 912 -384 -4811; X 4 http: //www. rd. usda. gov/files/gasfh 504 contactlist. pdf

QUESTIONS ? ?

Contact Information Rural Development Single Family Housing Division Ed. peace@usda. gov Office: 706 -552 -2593 www. rd. usda. gov/ga