The U.S. Department of Agriculture-Rural Housing Service (RHS) issued a final rule, effective October 1, 2019, which makes changes to single-close construction to permanent loans under the Single-Family Housing Guaranteed Loan Program (SFHGLP). The RHS intends for the rulemaking to provide increased flexibility in loan terms to facilitate and encourage single close loans, which will in turn stimulate new construction, rehabilitation, and homeownership in rural areas.
According to the RHS, the rulemaking will ease the financial costs of interim construction financing for non-depository lenders (warehouse line of credit lenders or warehouse lenders) by: (i) allowing a temporary interest rate higher than the permanent note rate for interim construction financing, (ii) remove the requirement for loan modification or re-amortization once construction is complete, and (ii) allow for the reserve of regularly scheduled principal, interest, taxes and insurance (PITI) payments during the construction period.
Additionally, the final rule allows rehabilitation as a single close loan purpose when a property being purchased requires rehabilitation to meet program standards, updates lender mortgage record retention requirements, and eliminates the maximum interest cap rate for all SFHGLP loans.
The RHS will be making updates to Chapters 5, 6, 7 and 12 of Handbook 1-3555, and has made advanced copies of the chapters available at the USDA LINC Training and Resource Library under “7 CFR 3555.”
Form RD 3555-21 has been updated to remove fields for interest rate, and lock and floating dates. DocMagic will have the new version of the form (Form ID RD355521.RH) available October 1, 2019. The USDA will continue to accept the prior version of the form for 30 days from the October 1, 2019 effective date.
