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| Subpart B | Lender Participation | 3555.51 – 3555.100 | |||||||||||||||||||||
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5 U.S.C. 301; 42 U.S.C. 1471 et seq.
78 FR 73941, December 9, 2013, unless otherwise noted.
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A lender must meet the requirements described in this section to be approved for participation in the SFHGLP.
(a) Ability to underwrite and service loans. The lender must have a demonstrated ability to underwrite and service single-family home loans. A lender will be considered to have such a demonstrated ability if it qualifies as one of the following:
(1) A State Housing Agency;
(2) A lender approved as a supervised or nonsupervised mortgagee by HUD with direct endorsement authority for submission of applications for Federal Housing Mortgage Insurance;
(3) A supervised or nonsupervised mortgagee with authority to close VA-guaranteed loans on the automatic basis;
(4) A lender approved by Fannie Mae for single-family loans;
(5) A lender approved by Freddie Mac for single-family loans;
(6) A Farm Credit System institution that provides documentation of its ability to underwrite and service single-family loans. Lenders who are a Farm Credit System lender with direct lending authority meet demonstrated ability;
(7) A lender participating in other Rural Development or Farm Service Agency guaranteed loan programs that provide documentation of its ability to underwrite and service single family loans. Documentation criteria for other Rural Development or Farm Service Agency guarantee loan programs require an active lender agreement; or
(8) A Federally supervised lender that provides documentation of its ability to originate, underwrite, and service single-family loans. Acceptable sources of supervision include:
(i) Being a member of the Federal Reserve System.
(ii) The Federal Deposit Insurance Corporation (FDIC).
(iii) The National Credit Union Administration (NCUA).
(iv) The Office of the Comptroller of the Currency (OCC).
(v) The Federal Housing Finance Board regulating lenders within the Federal Home-Loan Bank (FHLB) system.
(9) If lenders cannot meet the requirements under paragraphs (a)(1) through (8) of this section, they may demonstrate its ability to originate and underwrite loans by submitting appropriate documentation, examples of which include, but are not limited to:
(i) A summary of residential mortgage lending activity.
(ii) Written criteria outlining the lender's policy and procedures for originating, underwriting and closing residential mortgage loans.
(iii) Evidence of an experienced loan underwriter on staff.
(iv) Certification the lender will contract with an Agency-approved lender meeting the criteria to participate in the program as a servicer.
(10) A lender that proposes to service loans that cannot meet paragraphs (a)(1) through (8) of this section must demonstrate its ability by submitting appropriate documentation, examples of which include but are not limited to:
(i) Evidence of a written plan when contracting for escrow services.
(ii) Evidence the lender has serviced single-family residential mortgage loans in the year prior to request lender approval to participate in the SFHGLP.
(11) The financial requirements for non-supervised lenders not covered in paragraph (a)(8), must have:
(i) A minimum adjusted net worth of $250,000, or $50,000 in working capital plus one percent of the total volume in excess of $25 million in guaranteed loans originated, serviced, or purchased during the lender's prior fiscal year, up to a maximum required adjusted net worth of $2.5 million, and
(ii) One or more lines of credit with a minimum aggregate of one million dollars.
(b) SFHGLP participation requirements. Lenders and their agents must comply with the following requirements:
(1) Keep up to date, and comply with, all Agency regulations and handbooks, including all amendments and revisions of program requirements and policies. Lenders must also comply with all other applicable federal, state, and local laws, rules, and requirements, including those under the purview of the Consumer Financial Protection Bureau, such as the Real Estate Settlement Procedures Act and the Truth in Lending Act. Lenders who originate a minimal number loans, as determined by the Agency, in a 24 month time frame may be required to take updated training to ensure a lender's continued knowledge of the program;
(2) Regularly check Rural Development's Web site for new issuances related to the program;
(3) Underwrite loans according to Rural Development regulations and process and approve loans in accordance with program instructions;
(4) Review loan applications for accuracy and completeness,
(5) Ensure that applicant income limits are not exceeded;
(6) Ensure that borrowers have adequate loan repayment ability and acceptable credit histories;
(7) Ensure that loss claims include only supportable costs;
(8) Cooperate fully with Agency reporting and monitoring requirements;
(9) Comply with limitations on loan purposes, loan limitations, interest rates, and loan terms;
(10) Inform Rural Development immediately after the sale, transfer, or change of servicers of any Agency guaranteed loan;
(11) Maintain reasonable and prudent business practices consistent with generally accepted mortgage industry standards, such as maintaining fidelity bonding;
(12) Remain responsible for servicing even if servicing has been contracted to a third party;
(13) Use Rural Development, HUD, Fannie Mae, or Freddie Mac forms, unless otherwise approved by Rural Development;
(14) Maintain eligibility under paragraph (a) of this section;
(15) Notify Rural Development if there are any material changes in organization or practices;
(16) Be neither debarred nor suspended from participation in Federal programs, not debarred, suspended or sanctioned under state licensing and certification laws and regulation;
(17) Notify Rural Development in the event of its bankruptcy or insolvency;
(18) Remain free from default and delinquency on any debt owed to the Federal government;
(19) Allow Rural Development or its representative access to the lender's records, including, but not limited to, records necessary for on-site and desk reviews of the lender's operation and the operations of any of its agents to verify compliance with Agency regulations and guidelines;
(20) Maintain adequate operational quality control and reporting procedures to prevent mortgage fraud;
(21) Maintain complete loan files with all required documentation that is accessible by the Agency upon request for review; and
(22) Execute a lender's agreement provided by Rural Development.
(23) Provide documentation as required by the Agency to be reviewed every two years for lender participation and,
(24) Provide evidence that principal officers have a minimum of two years of experience in originating or servicing guaranteed mortgage loans as recommended in OMB Circular A-129.
[78 FR 73941, Dec. 9, 2013, as amended at 84 FR 70886, Dec. 26, 2019; 87 FR 53371, Aug. 31, 2022]
(a) Initial approval. The lender must apply for and receive approval from Rural Development to participate in the SFHGLP. Application forms are available from Rural Development.
(b) Conditions of approval. The lender must provide evidence to support their ability to originate, underwrite and/or service SFHGLP loans as outlined in § 3555.51(a), including evidence of the lender's internal loan criteria and quality control. New lenders will be subject to mandatory training prior to lender approval in accordance with Agency procedures.
(c) Termination of approval. Lender approval may be terminated in any of the following situations:
(1) Lapse of any eligibility requirement. In the event that a lender fails to meet any of the requirements described in § 3555.51, the lender must notify Rural Development immediately. Rural Development may terminate the lender's approval upon written notice and in accordance with the lender's agreement. The Agency may take other appropriate corrective action due to non-compliance with any of the requirements in this part and the lender's agreement. A lender whose approval has been terminated must sell any SFHGLP loans it holds to an approved lender immediately, and in no event later than 6 months, after termination of approval.
(2) Voluntary withdrawal. The lender may choose to end participation in the SFHGLP at any time. If the withdrawing lender has originated SFHGLP loans and obtained conditional commitments but has not closed the loans, or is holding or servicing SFHGLP loans, the lender must make arrangements prior to withdrawing for the transfer of such loans to lenders approved to participate in the SFHGLP.
Lenders may contract with mortgage brokers, non-approved lenders, or other entities for loan origination services, closing services, or both, provided the loan is transferred immediately after closing to an Agency approved lender to which the guarantee will be issued. The approved lender is responsible for ensuring that the loan is properly underwritten, obtaining the conditional commitment, ensuring that the loan is properly closed, and ensuring that all closing costs, financing, and settlement fees meet Agency program requirements.
Lenders may sell SFHGLP loans only to other Agency-approved lenders, Fannie Mae, Freddie Mac, or the Federal Home Loan Banks. In such a sale, the purchasing lender acquires all rights of the selling lender under the Loan Note Guarantee, and assumes all of the selling lender's obligations contained in any note, security instrument, or Loan Note Guarantee in connection with the loan purchased. The purchasing lender may be subject to any defenses, claims, or offsets that Rural Development would have had against the selling lender if the selling lender had continued to hold the loan. The lender must notify Rural Development immediately upon the sale or transfer of servicing of a SFHGLP loan.
(a) General requirements. The Agency may approve certain lenders for Delegated Lender status as defined in § 3555.10. The Delegated Lender assumes the responsibility for meeting all loan requirements on behalf of the Agency for the purposes of pre-closing loan processing, loan approval, and post-closing issuance of loan guarantee under subparts C, D, and E of this part with the following exceptions and clarifications:
(1) Application priority processing procedures under § 3555.107(a) are not applicable to applications processed by Delegated Lenders.
(2) Delegated Lenders must ensure appraisals meet the requirements under § 3555.107(d); however, loans made by Delegated Lenders are not subject to Agency administrative appraisal reviews prior to loan approval under § 3555.107(d)(4).
(3) The requirements relating to Conditional Commitments under § 3555.107(f) is not applicable to those lenders approved by the Agency as Delegated Lenders under the provisions of this subpart.
(b) Modifications. The following regulatory provisions in subpart A of this part are not applicable to Delegated Lenders or are modified as described in paragraphs (b)(1) and (2) of this section:
(1) Applications processed by Delegated Lenders with a conflict of interest under § 3555.8 are not subject to the requirements under § 3555.8(d). The other paragraphs of § 3555.8 still apply.
(2) Environmental reviews will be completed under § 3555.5 and 7 CFR part 1970 prior to loan approval. SFHGLP loans are generally considered to meet the requirements for a categorical exclusion from the environmental review process described in the cited authorities, absent any extraordinary circumstances. If there is an extraordinary circumstance, the Delegated Lender must notify the Agency to decide the appropriate course of action.
(c) Eligibility. Lenders must be approved to participate in the SFHGLP as provided in § 3555.51 and meet the following requirements:
(1) Have participated in the SFHGLP for at least the previous two years;
(2) Met the performance standards established by the Agency for delinquency, default, loss claims, etc. for the previous two years; and
(3) Complete Agency sponsored training each year.
(d) Automated underwriting system. Delegated lenders must use the Agency's automated underwriting system as described in § 3555.107(b).
(e) Oversight. The Agency will monitor lender performance through the regular use of loan level data and lender oversight and monitoring reviews. If the lender is unwilling or unable to improve performance within an acceptable timeframe, the Agency may revoke Delegated Lender status.
(f) Termination of delegated authority.
(1) The Agency may suspend or terminate the lender's delegated status for reasons including, but not limited to:
(i) Approving loans that do not meet Agency guidelines.
(ii) Providing data to the Agency's automated underwriting system which is not supported by documentation retained by the lender.
(iii) Unacceptable portfolio performance as evidenced by delinquency, loss claim, default rates, material deficiencies, or any other performance metric established by the Agency; and
(iv) Noncompliance with other requirements described in § 3555.51, or if the Agency determines that other good cause exists.
(2) Termination of a Delegated Lender's participation in the SFHGLP under § 3555.52 automatically revokes Delegated Lender status without separate Agency action under paragraph (g) of this section.
(g) Revocation of delegated status. Delegated Lenders will retain delegated status until revoked by the Agency or withdrawn by the lender. If the Agency revokes the delegated authority of a Delegated Lender, the Delegated Lender will be given appeal rights as specified in § 3555.4. This is distinct from termination from participation in the SFHGLP under § 3555.52.
(h) Administration of delegated program. The Agency may adjust, modify, or cancel the Delegated Lender program based on overall program considerations such as budget, program performance, and program integrity.
[91 FR 13216, Mar. 19, 2026]
The report and recordkeeping requirements contained in this subpart have been approved by the Office of Management and Budget and have been assigned OMB control number 0575-0179.