source:
  type: guide
  id: usda-hb-3555-3.1
  authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶3.1 —
    Introduction
  description: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶3.1
    — Introduction.
  coverage_tier: operative
obligations:
- id: usda-hb-3555-3.1-full
  canonical_id: usda-hb-3555-3.1-full
  section: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶3.1 — Introduction
  type: do
  tags:
  - regulator-direct
  - usda
  - usda-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶3.1
      — Introduction
    source_class: usda-handbook
    source_url: https://www.rd.usda.gov/sites/default/files/hb-1-3555_consolidated.pdf
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-05-25T14:10:13Z'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '3.1 INTRODUCTION A lender is defined as an entity that originates,
      services, or holds a loan guaranteed by the Agency. The Single Family Housing
      Guaranteed Loan Program (SFHGLP) is not intended to promote risky lending. For
      its success, the program relies on lenders to make sound underwriting decisions.
      Because the Agency does not underwrite the loans it guarantees, lenders that
      apply for loan guarantees must originate, underwrite, service, and hold loans
      responsibly. To ensure that these standards are met, the Agency must approve
      a lender before it participates in the SFHGLP. To be approved, a lender must
      agree to follow the Agency’s program guidelines and consistently demonstrate
      high-quality in the areas of loan origination, underwriting, servicing, and
      reporting. Once the Agency has approved the lender, it may participate in the
      program as long as it maintains these standards and continues to follow all
      program requirements. The Agency periodically monitors approved lenders to verify
      that continued program participation is warranted. 3.2 LENDER APPROVAL CRITERIA
      [7 CFR 3555.51] A lender must demonstrate that it has the expertise to make
      and/or service single- family housing mortgage loans. Lenders that have been
      approved for single-family housing loan-making activities by organizations referenced
      in Paragraph A of this section are considered to have demonstrated the ability
      to originate, underwrite, and service SFHGLP loans. In all other cases, the
      Agency determines whether a lender is qualified by reviewing the lender’s history,
      along with other documentation. In all cases, lenders are required to provide
      evidence that all principal officers have a minimum of two years of experience
      in originating or servicing guaranteed mortgage loans. In addition, all guaranteed
      lenders must be registered in the System for Award Management (SAM) system,
      which is validated by the Agency in the lender approval process. A. Approval
      from Another Recognized Source Acceptable documentation includes a copy of the
      official letter or other verifiable communication from an acceptable secondary
      market organization or other Federal government agency showing that the lender
      is approved for participation by that entity. HB-1-3555 (03-09-16) SPECIAL PN
      3-2 Revised (07-21-23) PN 588 Guidance documents lack the force and effect of
      law, unless expressly authorized by statute or incorporated into a contract.
      USDA may not cite, use, or rely on any guidance that is not available through
      their guidance portal, except to establish historical facts. The lender must
      also provide the additional documentation listed in Attachment 3-A, Lender Approval
      Checklist. The Agency reviews and confirms the information submitted by the
      lender. Acceptable secondary market organizations, Federal government, and state
      agencies include: x A State Housing Finance Agency (SHFA). Evidence that a private
      sector lender is approved by a SHFA to participate in SHFA programs does not
      represent an automatic approval to participate in the guaranteed program. x
      The U.S. Department of Housing and Urban Development-Federal Housing Administration
      (HUD-FHA), when the lender is approved as a supervised or non- supervised mortgagee
      with Direct Endorsement Authority for title II lending activity. x Government
      National Mortgage Association (Ginnie Mae), when the lender is an issuer of
      Ginnie Mae mortgage-backed securities. x The U.S. Department of Veterans Affairs
      (VA), when the lender is a supervised lender or is approved as a supervised
      or non-supervised mortgagee with the authority to close loans under VA’s automatic
      guaranty procedure. x Fannie Mae, when the lender is approved for single-family
      loan activities. x Freddie Mac, when the lender is approved for single-family
      loan activities. The Agency may revoke a lender’s approval to participate in
      the SFHGLP if the lender fails to maintain the appropriate eligibility status
      or violates the terms and conditions of the Agency’s lender agreement. B. Approval
      by Demonstrated Ability A lender that does not meet the conditions of Paragraph
      3.2A may seek approval by demonstrating its ability to originate and/or service
      sound loans. In such a case, the lender must meet the following criteria: x
      Be overseen by a Federal regulator, be a Farm Credit System (FCS) institution,
      be an active participant with an approved lender agreement in another USDA guaranteed
      loan program, or meet the requirements for demonstrated ability, as outlined
      in this section; x Have 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 HB-1-3555 (03-09-16) SPECIAL PN 3-3 Revised (07-21-23) PN
      588 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely
      on any guidance that is not available through their guidance portal, except
      to establish historical facts. originated, serviced, or purchased during the
      lender’s prior fiscal year, up to a maximum required adjusted net worth of $2.5
      million; and x Have one or more lines of credit with a minimum aggregate of
      one million dollars. 1. Federal Oversight A lender that is a federally regulated
      depository institution may be considered for participation in the SFHGLP. The
      lender must provide an official letter, or other verifiable communication, from
      the oversight authority that indicates the lender’s ability to process, underwrite,
      and service single-family residential mortgage loans. The documentation must
      confirm that Federal oversight is being provided by one of the following Federal
      oversight entities: x The Federal Reserve System; x The Office of the Comptroller
      of the Currency (OCC); x The Federal Deposit Insurance Corporation (FDIC); x
      The National Credit Union Administration (NCUA); or x The Federal Housing Finance
      Board regulating lenders within the Federal Home Loan Bank (FHLB) system. 2.
      Experience with a USDA Program or Farm Credit System A Farm Credit System institution
      or lender participating in certain other USDA programs is eligible to participate
      in the SFHGLP if it can also demonstrate experience in underwriting and servicing
      single-family residential mortgage lending. Lenders meeting these criteria include:
      x An FCS lender with direct lending authority; or x A lender participating in
      other Rural Housing Service, Rural Business- Cooperative Service, Rural Utilities
      Service, or Farm Service Agency guaranteed loan programs that has an active
      lender agreement. 3. Demonstrated Ability The lender must have a proven ability
      to originate, underwrite, and/or service single-family mortgage loans and must
      have a staff with adequate knowledge and expertise in these areas. Expert knowledge
      and experience in residential mortgage HB-1-3555 (03-09-16) SPECIAL PN 3-4 Revised
      (07-21-23) PN 588 Guidance documents lack the force and effect of law, unless
      expressly authorized by statute or incorporated into a contract. USDA may not
      cite, use, or rely on any guidance that is not available through their guidance
      portal, except to establish historical facts. lending may be demonstrated through
      the following documentation: x A summary of residential mortgage lending activity.
      At a minimum, the summary must include the dollar amount and number of residential
      mortgage loans in its loan origination and servicing portfolio, along with percentages
      of delinquencies, foreclosures, and credit losses. The Agency will examine the
      summary to verify that the lender’s performance is comparable to that of other
      participating lenders in good standing. x Written criteria that outline the
      policies and procedures the lender typically follows when originating, underwriting,
      and closing residential mortgage loans. The quality control system must ensure
      that the lender demonstrates safe and sound lending practices including, but
      not limited to, the analysis and review of appraisals and other factors affecting
      property values, credit analysis and review, and income analysis and review.
      In addition, the policies and procedures must comply with all applicable laws
      and regulations such as the Equal Credit Opportunity Act (ECOA), the Real Estate
      Settlement Procedures Act (RESPA), and the Home Mortgage Disclosure Act (HMDA).
      x Evidence that the lender has an experienced loan underwriter on staff. The
      lender must provide a copy of the underwriter’s signed resume showing that the
      underwriter has at least two years of experience in underwriting single family
      residential loans, and is knowledgeable of the principles, practices, and techniques
      of residential mortgage lending. 4. Additional Requirements for Originating
      Lenders that do not Service Loans A lender that does not intend to service SFHGLP
      loans must certify that it will contract with an Agency-approved lender that
      agrees to follow all Agency servicing requirements, and that has the capacity
      to hold funds for taxes and insurance in escrow. Originating lenders should
      be prepared to escrow funds for taxes and insurance when required to repurchase
      loans. 5. Additional Requirements for Lenders Servicing Loans If the lender
      intends to service SFHGLP loans, the lender must provide the following additional
      documentation: x Written criteria concerning the policies and procedures for
      servicing residential mortgage loans. The Agency will review these policies
      and procedures to determine if escrow accounts are handled in compliance with
      HB-1-3555 (03-09-16) SPECIAL PN 3-5 Revised (07-21-23) PN 588 Guidance documents
      lack the force and effect of law, unless expressly authorized by statute or
      incorporated into a contract. USDA may not cite, use, or rely on any guidance
      that is not available through their guidance portal, except to establish historical
      facts. RESPA, and that all other applicable laws and regulations, such as the
      Fair Credit Reporting Act (FCRA), are followed. x Evidence of a written plan
      if the lender contracts for escrow services. If a lender does not have an escrow
      system for taxes and insurance, it must submit a written plan to the Agency
      for ensuring that taxes and insurance for mortgage loans are paid when due.
      x Evidence that the lender has serviced single-family residential mortgage loans
      in the year before applying for Agency approval. This documentation should include
      the number and dollar amount of the loans in the lender’s portfolio, the number
      and percentage of loans in default (categorized by 30-60-90-days late, in bankruptcy,
      and in foreclosure), and the number, percentage, and dollar amounts of loans
      on which losses have been paid. The Agency reserves the right to re-evaluate
      a lender’s status from time to time. Lenders who fail to follow established
      guidelines for real estate taxes and hazard insurance premiums, or other conditions
      of the lender’s agreement, may have their lender approval revoked by the Agency.
      The lender may be required to provide information to support continued Agency
      approval, similar to the documentation provided with its initial application.
      C. Participation as an Agent of an Approved Lender A lender that does not meet
      the requirements for Agency approval may participate in the program as the agent
      of a lender approved by Rural Development. The lender approved by Rural Development
      must designate the agent in writing and state the functions that the agent performs
      on its behalf. The agent may be permitted to originate the loan and close it
      in their name as long as the loan was reviewed by the approved lender and is
      transferred to the approved lender immediately upon closing and prior to issuance
      of a Loan Note Guarantee. The lender approved by Rural Development is responsible
      for ensuring that its agent’s loan origination, underwriting, and closing activities
      are in accordance with Agency standards. The Conditional Commitment for Loan
      Note Guarantee and the Loan Note Guarantee will be issued to the approved lender.'
  judgment: false
