September 16, 2015
USDA will be increasing the upfront Guarantee Fee from 2.00% to 2.75% for RD conditional commitments received on or after Thursday, October 1, 2015.
Per USDA, GUS applications in a “Final Submission” status with an upfront guarantee fee of 2% must receive a conditional commitment from RD prior to the close of business on Wednesday, September 30th, 2015. If this does not occur, REMN Wholesale will be required to re-underwrite the loan with the new upfront guarantee fee of 2.75% and resubmit the application to RD in GUS.
As some RD State Offices are working through a backlog of guaranteed applications, this may have a negative impact on USDA applications in which it has been estimated that RD will be unable to issue the conditional commitment prior to close of business on Sept 30th. Please see the below “Resubmission Details” section from a recent USDA announcement which references the resubmission process for the impacted loans. Unfortunately we do not have any information as to the turn time by USDA office.
Brokers should monitor their USDA loan applications and identify if any of them will be negatively impacted by the upfront guarantee fee increase, and have those applications submitted for underwriting based on the new fee of 2.75%.
On October 1, 2015, GUS applications in a “Final Submission” status, with an upfront guarantee fee of 2 percent that were not issued a conditional commitment by RD prior to the close of business on September 30, 2015 will be subject to a conversion process. The process will release these loans back to the lender in GUS. Lenders must open the application in GUS and update the “Upfront Guarantee Fee/Annual Fee Option” data field, on the “Loan Terms” application page, by selecting the “FY16: 2.75% GuarFee+.5% Ann Fee” option from the dropdown box.
Once all GUS data has been updated the lender must perform a “Final Submission” to RD. An updated Form RD 3555-21, “Request for Single Family Housing Loan Guarantee,” must be submitted to RD and uploaded into GUS when the debt ratios increase (as compared to the original Form RD 3555-21 submitted to RD) due to a higher upfront guarantee fee regardless of the underwriting recommendation. The updated form must be executed by both the applicant(s) and the lender, and it can be executed at closing or settlement. Additional documentation may be required when the original underwriting recommendation is changed and/or the underwriting recommendation is “REFER” or “REFER WITH CAUTION.” Refer to the GUS Underwriting Findings Report for guidance.
If you have any questions, please contact your Account Executive.