Originators Need to Be Aware of USDA Submission Rules as Rates Rise

If the interest rate or the amount increases on a USDA Rural Development Guaranteed Loan Program mortgage application, certain revised documents need to be submitted, an agency representative told attendees at the Florida Association of Mortgage Professionals annual convention in Orlando.

The USDA is warning originators not to close loans with higher loan amounts or interest rates than noted on the conditional commitment.

Under the program’s guidelines, the maximum rate is determined on the day the loan is locked, said Bob Coordsen, a housing specialist in the Gainesville, Fla., office. The calculation is the Fannie Mae 90-day delivery net yield, plus 60 basis points, rounded up to the nearest quarter of 1%.

But if a rate rise causes this threshold to be exceeded after the loan is submitted, a revised Form RD 1980-21 (Request for Single Housing Loan Guarantee) has to be submitted, signed by the lender and the applicant; a revised Fannie Mae 1008, executed by the underwriter also has to be submitted. A revised Fannie Mae 1003 loan application, signed at closing, is also needed to comply with this requirement as well.

Coordsen also reminded originators that the RD 1980-21 has been updated and that they must be submitting the full page set of the revised form.