RHS Releases Final Rule for Single Family Loan Program

The U.S. Department of Agriculture’s Rural Housing Service (RHS) published a final rule on Feb. 8 implementing changes to its Single Family Housing Guaranteed Loan Program (SFHGLP).

Designed to streamline the program, the final rule:

• Removes the cap on the number of units per year for a single contractor or builder under the combination construction and permanent loan feature. It also allows a combination construction and permanent loan to be used for a manufactured home if the builder’s contract includes the sum of the cost of the unit and all on-site installation costs.

• Allows discount points as a permissible loan purpose to “buy down” the interest rate for moderate-income borrowers, as well as for low-income borrowers.

• Extends the SFHGLP guarantee to coincide with the terms of a loan modification, including an extended-term loan modification so that the guarantee will cover the duration of the loan.

• Permits lenders to charge a maximum interest rate equal to the Fannie Mae posted yield plus 1%, but removes language from a 2013 interim rule referencing the Freddie Mac required net yield, since Freddie Mac no longer publishes its net yield rate.

The final rule becomes effective March 9, 2016.