New RD info for Florida and beyond!

This comes in courtesy of Bob Coorsden and our USDA friends in Gainesville, FL. He has issued a very informative email relating the current state of affairs. There are a number of attachments to the original email I would be happy to forward on but you can copy most of it from here. This link is mostly lender info. For Realtors or the general public in Florida check here for info.

Most importantly is the announcement that RD will not accept credit scores of 580 or less if there is ANY derogatory credit. Statically it is possible to have scores under 580 with no derogs (very high balance revolving coupled with excessive inquiries for example) but it's very unlikely. That is almost like limiting the program to 581 or better.

They explain their stance by providing this very strong argument. Scores under 619 including no scores, while representing 23% of the portfolio represent 55% of the losses. It is clear the most questionable loans are under 620 score and they account for the vast majority of the losses. While I can personally attest to a 596 score I'm closing Monday, look for these loans to be highly scrutinized as they should be.

Gerry Suarez, Jr

Your HUD Loan Pro!

The following is the email in its entirety for those who wish to read it:

Hello

THANK YOU! Thus far in FY-2008 you have assisted over 1,800 Florida and Virgin Islands families achieve their homeownership dreams with $257,000,000 in Rural Development guaranteed loans. Contrary to some rumors, ample funds are available for the balance of FY-2008 (ending September 30). Over $6,000,000,000 has been guaranteed nationally in FY-2008. If you are not using this product, it is obvious that you are missing out. Your peers love the product.

The loan features: 102% LTV (limited only by the appraisal); no down payment; no mortgage insurance; 30-yr fixed with competitive rate; no explanations on credit with FICO of 620+; no restrictions or limits or seasoning on gift funds; no reserves required; no loan limit except as capped by repayment ability (there are income limits). The property must be located in a Rural Development designated eligible area. See below information for using the RD 'eligibility' web site.

Do you know GUS? GUS is a FREE web based (no software to download) Guaranteed Underwriting System. Hundreds of lenders are using GUS with fantastic results. If you are a RD 'approved' underwriting lender and not using GUS, you are missing out. The obvious advantage is standardized underwriting. GUS does not reject a loan. Lenders can manually underwrite an cases that receive a 'refer' or 'refer with caution'. A huge advantage is that only three (3) documents are shipped to RD with the 'accept' determination from GUS: RD Form 1980-21 (application); flood cert; and appraisal.

Contact me by email to start your very simple sign-up process.

NOTE: it is presently NOT available for direct use by lenders (brokers and lenders) who are not responsible for underwriting the loans. We anticipate that GUS enhancement sometime in early calendar year 2009.

How are mortgage brokers and other non-underwriting lenders benefiting now? Several wholesale lenders are using GUS with their brokered loans. They are doing the GUS input on behalf of the broker. This eliminates the need for the brokers to submit two packages to the wholesale lender. Those that I am aware of are: American Partners Bank; J.P. Morgan Chase; SunTrust Mortgage; and Taylor, Bean & Whitaker. I apologize if I missed any wholesale lenders using it.

Attached are:

• National newsletter for August-September
• File Submission Checklist: A copy of a few documents from the credit file are sent to the local RD Area by the underwriting lender. The checklist emphasizes that less is better. The RD has very limited staff with high volume (and other duties). They are not underwriting the file but must accomplish a due diligence review. Digging the minimum required items from a full credit file is very time consuming. Remember, include your detailed calculations of projected adjusted household income and the repayment income.
• Form 1980-21, Application: This is the only form needed unless the project is a construction-perm loan. Obtain the customer signatures on the certification (reverse side). The underwriting lender must complete the balance of the form.
• Handbook Aug 08: The handbook provides more detail and incorporates much of the national directives. It was updated to include the new file submission checklist, update the processing guide, and remove the Form 1980-86, Reservation of Funds (no longer required on FL/VI loans).
• Administrative Notice 4366 on underwriting issues:
• Administrative Notice 4346 on credit: Note that a FICO of 580 or less will NOT be accepted if there are ANY derogatory credit items. Even then, it will take extraordinary compensating factors.
  • See the attached slide regarding relationship of FICO scores and Agency losses. Those with 619 or less or no score constituted 23% of the portfolio but account for a whooping 55% of the losses!! Remember, taxpayers like you are picking up the tab. The guarantees are paid directly from the U.S. treasury. It is NOT mortgage insurance.

See the mapping system at www.eligibility.sc.egov.usda.gov Click on "single family" under "Property Eligibility". If it does not recognize the address, go to the map of U.S., click on FL (all of VI is eligible), look for the county in the list on the right. If the county is not listed, it is TOTALLY eligible, look not further. If it is listed, click on county name and a map will come up. Click the last icon in the column of icons on the left of the map to make the map larger. The orange colored area is not eligible, the lighter shade is eligible. To get more detail, activate the magnifying tool and zoom in on the general location of the property. This map is not as up-to-date as Google or MapQuest. Therefore, you may want to first find the property on one of those systems and print. Then use that information (regarding street names and general location) to assist with finding the property on the 'eligibility' site. You can magnify down to the point necessary to see if the property is in the darker orange colored area or in the lighter shaded area (eligible).

We look forward to partnering with you for another fantastic year in FY-2009. Again, thank you.

BOB COORDSEN

Guaranteed Housing Specialist

Rural Development, USDA