The U.S. Department of Agriculture - Rural Development (“USDA”) has announced updates to several chapters of the Single Family Housing Guaranteed Loan Program Technical Handbook (“HB-1-3555”). The recently published Procedural Notice 640 outlines changes to Chapters 2, 6, 12, and 13, that became effective on May 5, 2025. The notable updates in each Chapter are indicated below as excerpted from the USDA announcement:
Chapter 2 – Record Retention
- Update reference to current FEMA Standard Flood Hazard Determination form.
- Information added regarding how to retain documents in GUS and the electronic customer file (ECF).
Chapter 6 – Loan Purposes
- Clarification that funds provided by the seller to cover the buyer’s real estate commission fees are not included in the 6% seller concession limitation.
- Clarify that fixed interest rates for refinanced loans must be at or below the current interest rate, and existing loans being refinanced must not have a delinquency greater than 30 days in the last 180 days prior to submission to the USDA.
- Removed existing manufactured homes from list of prohibited loan purposes.
Chapter 12 – Property and Appraisal Requirements
- For existing and new dwellings, a one year builder’s warranty must be fully executed.
- Clarification that repair escrows are allowed after the issuance of the Loan Note Guarantee as long as the estimated cost is not greater than 10% of the total loan amount.
- Appraisals removed from list of credit verification documents.
- Update to non-structural repairs escrow amount to be allowable up to $75,000.
- “Repairs to new or existing manufactured homes” removed from list of prohibited purposes.
Chapter 13 – Special Property Types
- New section added to clarify that community land trust and leasehold interest properties require a title insurance policy.
- Definition of manufactured home updated to distinguish between those type homes and modular homes.
- New manufactured homes - authorized loan purposes amended to require that the home must have been build within 12 months of the date of loan closing, and the certification label must remain visible after all work has been done in order to complete the installation of the home at the home site.
- Existing manufactured home – eligibility requirements added, including the requirement that homes must have been constructed within 20 years from the date of loan closing, or are ineligible.
DocMagic will continue to provide USDA updates as they become available. If you have additional questions, please contact DocMagic’s Compliance Department.