16.2 CLOSING THE LOAN (07/07/17)

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

The lender has 90 days from the issuance of Form RD 3555-18/18E to close the loan. If construction is involved, the requested expiration date of Form RD 3555-18/18E will correspond with the projected completion of construction (i.e. Florida may have a new construction period of six months, so the expiration of the commitment issued would coincide with the construction period). Prior to expiration, of the conditional commitment, the lender may request the Agency extend the conditional commitment for one additional 90-day period if the lender has been unable to close the loan due to circumstances beyond their control. New construction is limited to an expiration date, including any extension granted, to no greater than 12 months from the issuance of the commitment as provided in Chapter 15 of this Handbook. Examples of valid reasons for 90-day extensions might include construction delays due to weather conditions, repairs to the home, or an inability to obtain construction materials resulting in work postponement. The Agency must grant any approved extension in writing, either through a letter or a fax that includes a signature of an approval approval official. Extensions of the term of the Conditional Commitment must be maintained in the lender’s case file. The GLS application page will be updated with the commitment extension.

Closing in Compliance with Conditional Commitment Approval. The loan must close under the same terms it was underwritten and approved for the conditional commitment unless the change does not adversely affect loan approval (i.e. lower loan amount, lower interest rate). In the event there are any changes in the loan terms, characteristics of the applicant, or characteristics of the property, between the issuance of Form RD 3555-18/18E and loan closing, or if any conditions or requirements imposed by the Agency will not be met, the lender must notify the Agency in writing. The Agency must verify in writing prior to loan closing that the changes are acceptable. Examples of changes that the Agency would need to review include increases in the interest rate, loan amount or changes in borrower status, such as an increase or reduction in household income.

Signatures All individuals applying for the loan and assuming responsibility for the mortgage debt must sign the Uniform Residential Loan Application and any addenda. Any individual whose signature is required by state laws (for example - a non-purchasing spouse) must sign the security instruments and/or note in order to create a valid first lien, to pass clear title, or to waive inchoate rights. All owners to be vested in title must sign the security instruments except as noted in this section. Additional signatures on the security instruments for individuals who have not been reviewed during the mortgage credit analysis may jeopardize issuance of the loan note guarantee. Borrowers should not sign blank or incomplete documents.

A Power of Attorney (POA) may be used when the Mortgagee verifies and documents that the following applicable requirements have been satisfied:

Electronic signatures in accordance with the conditions outlined in Chapter 15 of this handbook may be accepted.

Interest Credit Closing. To reduce the burden on borrowers whose loans were scheduled to close at the end of the month, but did not due to unforeseen circumstances, lenders and borrowers may agree to credit the per diem interest to the borrower and have the mortgage payments begin the first of the succeeding month.

Lender Certification. The lender must sign Form RD 3555-18/18E or will be subject to electronic certification when using the Agency’s automated method of loan closing, to certify that no major changes have taken place that would affect eligibility for the loan guarantee, except those approved by the Agency in writing, and that all conditions specified on Form RD 3555-18/18E have been met. Whether a lender certifies by executing Form RD 3555-18/18E or submits the request electronically, the lender certifies to the following:

• No major changes have occurred since the issuance of the Conditional Commitment for Single Family Housing Loan Guarantee that affect the subject loan request, except any that have been approved by the Agency in writing.
• The loan closed in accordance with the amount (equal to or less than) and conditions set forth in Form RD 3555-18/18E. The lender will be subject to additional criteria if the loan is closed for an excessive loan amount. An excessive loan amount occurs when the lender closes a loan in an amount higher than permitted by Form RD 3555-18/18E. To obtain a Loan Note Guarantee, the lender may choose to reclose the loan to the guarantee amount as reflected on the Form RD 3555-18/18E, or request a revised Form RD 3555-18/18E. A revised Form RD 3555-18/18E is subject to continued eligibility as set forth in 7 CFR part 3555 and the availability of funding.
• If the interest rate was not fixed at the time the Conditional Commitment for Single Family Housing Loan Guarantee is issued, and the interest rate increased between issuance of the Conditional Commitment for Single Family Housing Loan Guarantee and loan closing, the change is noted and documentation of the fixed rate, at lock, is submitted.
  • If either or both of the underwriting ratios are exceeded, as a result of an interest rate increase, compensating factors that demonstrate sufficient repayment continues to exist, is required. Documentation supporting the increase must be included in the Loan Note Guarantee request.
• No default exists.
• The lender has not imposed any charges or fees against the borrower in excess of those permissible as set forth in 7 CFR part 3555.
• The information submitted to the Agency is true, accurate and complete.
• The information obtained in the loan application was obtained directly from the borrower by an employee of the undersigned lender or the lender’s duly authorized agent and is true to the best of the lender’s knowledge and belief.
• The credit report submitted on the subject borrower (and co-borrowers(s), if any) was obtained by the undersigned lender or the lender’s duly authorized agent directly from the credit bureau which prepared the report and was received directly from said credit bureau. The lender represents credit documentation has been re-verified since issuance of the Conditional Commitment, if the verification at closing was in excess of 120 days of the loan closing. Updated documentation is retained in the lender’s permanent loan file.
• The verification(s) of employment and verification(s) of deposits, if applicable were requested and received by the lender of the lender’s duly authorized agent without passing through the hands of any third persons and are true to the best of the lender’s knowledge and belief. The lender represents employment and/or asset documentation has been re-verified since issuance of the Conditional Commitment, if the verification at closing was in excess of 120 days of loan closing. Updated documentation is retained in the lender’s permanent loan file.
• The loan to the named borrower(s) meets the income and credit requirements of 7
• CFR part 3555 and other applicable regulations concerning guaranty of loans. The loan conforms to the applicable provisions of 7 CFR part 3555.
• All planned property acquisition (construction, repairs, alterations or improvements) has been completed upon which the market value of the property is predicated unless:
  • An escrow account has been established in accordance with 7 CFR 3555.202(c) and Chapter 12 of the Single Family Housing Guaranteed Loan Program Handbook (HB-1-3555).
  • Lender confirms development/repair work for which an escrow account was established has been: o completed or o will be completed within 180 days of loan closing. If incomplete, the lender agrees to confirm development/repairs are complete in writing or presentation of the final inspection to Rural Development. Note: Confirmation development/repair work is finished is not required for issuance of a Loan Note Guarantee, but is required upon completion of the work. Remaining escrow funds that represent loan funds must be applied to the principal loan amount.
• The required hazard insurance coverage is in effect. Flood insurance has been obtained, as applicable, if the structure is located in 100 year special flood hazard area.
• All Truth-in-Lending requirements have been met.
• All equal employment opportunity and nondiscrimination requirements have been met.
• The loan has been properly closed and the required security instruments, including recapture of subsidy (as applicable) has been obtained.
• The borrower(s) have marketable title to the collateral now owned by the borrower subject to the instrument securing the loan to be guaranteed and any other exceptions approved in writing by the Agency.
• Lien priorities are consistent with the requirements of the Conditional Commitment for Single Family Housing Loan Guarantee. The security instrument has been recorded and is a good and valid first lien on the property described.
• The loan proceeds have been disbursed for purposes and in amounts consistent with the Conditional Commitment for Single Family Housing Loan Guarantee.
• There has been no adverse change in the borrower's financial condition or any other adverse change in the borrower's situation since the Conditional Commitment for Single Family Housing Loan Guarantee was issued by the Agency.
• All inspections in accordance with 7 CFR §§ 3555.201 and 3555.202 and Chapter 12 of HB-1-3555 have been obtained. Evidence of inspections has been retained in the lender’s permanent loan file.
• All other requirements listed in the Conditional Commitment for Single Family Housing Loan Guarantee have been met.
• Copies of the credit and security instruments submitted herewith are true and exact copies as executed and filed for record.
• If the sale of the note or transfer of servicing occurs subsequent to this certification, the lender agrees to notify Rural Development in accordance with 7 CFR § 3555.54.