Refinance USDA Loan

Rural Refinance Pilot program for Kentucky

Single Family Housing Kentucky Guaranteed Loan Program
Rural Refinance Pilot

 

PURPOSE/INTENDED OUTCOME:
The purpose of this Administrative Notice (AN) is to announce that eligible loan closing
costs may be included in the Rural Refinance Pilot program loan amount. The Rural
Refinance Pilot is designed to assist existing Section 502 borrowers, for both direct and
guaranteed loans, to refinance their homes with greater speed and ease. The pilot
program is available for a two year period to borrowers in “Hardest Hit” states, where
steep home price declines and unemployment have made refinancing a current mortgage
into more affordable terms very difficult or impossible. Borrowers in these states will be
able to refinance their homes to secure lower interest rates and monthly payments without
the need of obtaining a new credit report, new appraisal, or new property inspections.

SECTION 502 GUARANTEED LOAN PROGRAM Kentucky  RURAL REFINANCE PILOT
GUIDELINES:
Brief Pilot Description: The Rural Refinance Pilot is available to eligible borrowers
who qualify to refinance their current USDA mortgage loans in the state of Kentucky . Under the Rural Refinance Pilot program, a lender does not need to submit a new credit report, new appraisal, any
HUD Handbook minimum property determinations, or any additional property
inspections. An appraisal will be required for a direct loan refinanced into a new
guaranteed loan.

Eligible Borrowers: Current Section 502 Direct or Guaranteed Loan borrowers must:
1. Meet current income eligibility requirements;
2. Reside in an eligible rural area or an area that was eligible at the time of the
original loan closing; and
3. Have made timely mortgage payments for the 12-month period prior to the
refinance.

Overview of Rural Refinance Pilot Guidelines:
1. The existing loan must be a Section 502 Direct or Guaranteed loan.
2. The new interest rate must be a fixed rate, and a minimum of 100 basis points
below the current interest rate. The interest rate must not exceed RD
Instruction 1980-D, Section 1980.320.
3. The new term of the refinance loan must be thirty years.
4. Borrowers may not be added or removed (unless deceased) from the current
loan.
5. A Rural Refinance Pilot loan may include the principal balance of the loan
plus a portion of or the full upfront guarantee fee and eligible loan closing
costs. The applicable one time upfront guarantee fee for a refinance is 1.5
percent. No cash out is permitted to the borrower. Subsidy recapture due for
direct loan borrowers is not eligible to be part of the refinance loan. Subsidy
recapture must be paid in full by the borrower or subordinated.
6. An annual fee also applies.
7. The home must remain the borrower’s primary residence.
8. A new appraisal, new credit report, HUD Handbook determination and
additional property inspections are not required.
9. Direct loan borrowers will require a new appraisal to calculate subsidy
recapture that may be due, but it will not be used for loan-to-value purposes.
The cost of this appraisal is an eligible loan closing cost.
10. Debt-to-income ratio calculations are not required. Therefore debt ratio
waiver requests will not be necessary.
11. Rural Refinance Pilot loans must be manually underwritten. They cannot be
processed through the Guaranteed Underwriting System (GUS)

12. Customary and reasonable closing costs and other fees may be collected from
the borrower by the lender. Such charges may not exceed the cost paid by the
lender or charged to the lender by the service provider. An origination fee of
up to 1 percent of the total loan amount may be charged to the borrower as an
eligible loan closing cost.
13. All the following documentation is required:
a. Form RD 1980-21 “Request for Single Family Housing Loan Guarantee.”
b. Income verifications for all adult household members.
c. Uniform Residential Loan Application.
d. Evidence of qualified alien status, if applicable.
e. FEMA Form 81-93. Appropriate flood insurance must be obtained if the
property is in a flood zone at the time of the new loan closing, even if the area
was not in a flood zone at the time of the original loan closing. A flood
elevation survey is not required for this pilot.
f. Evidence of previous 12 month mortgage payment history. The lender must
secure evidence to document the borrower(s) has paid the loan on time for the
previous 12 months. The lender may utilize a Verification of Mortgage
obtained from or provided directly by the loan servicer that lists the payment
history for each of the previous 12 months. As an alternative, the lender may
submit a credit report which reflects a satisfactory mortgage payment history
over the past 12 months. If the lender submits a credit report to Rural
Development as proof of payment history, only the payment history of the
current mortgage will be considered. Credit waivers or explanations for
adverse credit that may be present on the report are not required.
14. All additional requirements of RD Instruction 1980-D and applicable
Administrative Notices continue to apply.
Instructions to obtain a “Statement of Loan Balance” or payoff/subsidy recapture
due for a Section 502 Direct loan borrower:
Lenders may determine an applicant has a direct loan when the credit report reflects the
mortgage loan creditor as “USDA,” or the applicant informs the lender they applied and
received their mortgage loan through a USDA Service Center.
SFH Direct loans are serviced by the Centralized Servicing Center (CSC) located in St.
Louis, MO. When lenders have a direct loan applicant they may obtain a payoff from the
CSC.
Steps for obtaining a “Statement of Loan Balance” letter:
1. On letterhead suitable for fax transmission include the borrower’s name, account
number, address,



 
Joel Lobb
Senior  Loan Officer

(NMLS#57916)
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
 Fax:     (502) 327-9119
 
 Company ID #1364 | MB73346