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USDA / Rural Development

Shawn Von Talge



04-26-2012

The USDA/”Rural Development” loan has been a program staple for most lenders for quite some time, especially in rural Central Missouri. Given this fact USDA/RD has seen tremendous growth not only in it’s exposure to guaranteeing these types of loans but also the manner in which it delivers the product to the client (i.e. home buyer). Given this fact I wanted to point out a key delivery change recently implemented by USDA and some highlights of things to look for when ensuring the home in question will meet USDA/RD guidelines.
 
First, let’s discuss the delivery change. In the past the lender would deliver the completed and cleared-to-close package to the local USDA/RD office (typically by email and/or fax). When this was done the normal procedures from the USDA side were to review the file and issue the “Conditional Commitment” (The CC must be in the lender’s possession prior to closing). This process normally took a maximum of 48-72 hours and on extreme time crunches just a few hours. Lenders had developed a really good working relationship with the local offices given this fact. However, given the extreme growth, over lapping and often “different” views by local USDA offices on guidelines and some inconsistencies across the state offices a fairly major change was made that has greatly impacted recent USDA/RD closings. The current and newly implemented system requires all submissions to be sent to a centralized location (i.e. portal). At that point the submissions are logged and time stamped. From this point the USDA/RD Specialists pull submissions from the portal in the exact order that they were uploaded (for the entire state). Currently turn times for receiving the CC is 4-5 business days! Obviously this has put a lot of prospective home buyers and sellers in a very uncomfortable and unforeseen situation as lenders cannot close until these are received nor were we expecting this type of time frame.  On one hand it’s good as we will now have some uniformity across the state regardless of where the property is located. However, on the other hand the time frames certainly make it difficult for us, as the lender, to give any type of guarantee for closing’s without a shorter response time. One tid-bit I would like to point out in this process is if we deliver a file and missed something the specialist has the authority to pull the submission out of line, request the missing documentation and then we must re-submit and start the process over again. Fortunately, we have not had this happen but I’m sure it’s only a matter of time before it does.
 
Second, let’s discuss some of the most common USDA/RD “Non-compliant” items found on appraisals (see below).
 

  • Smoke detectors not installed or working properly
  • GFCI’s (Ground Fault Circuit Interrupter) not installed within 10 feet of water
  • Peeling or Chipping paint
  • Handrails not installed up and/or down stairs
  • Broken or cracked glass
  • Missing drywall/fire break from the garage to the home
  • Missing vapor barrier (crawl space only)
  • Failure to meet “Egress” (typically found on finished “pit” basement residences)

 
There is certainly more things looked at during the home appraisal to ensure USDA/RD compliance however these are just some of the most common issues found.
 
Thanks for reading!
 
Shawn Von Talge
 
 
 

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