source:
  type: guide
  id: usda-hb-3555-12.2
  authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶12.2 —
    Overview
  description: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶12.2
    — Overview.
  coverage_tier: operative
obligations:
- id: usda-hb-3555-12.2-full
  canonical_id: usda-hb-3555-12.2-full
  section: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶12.2 — Overview
  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 ¶12.2
      — Overview
    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: '12.2 OVERVIEW The lender must ensure the subject property meets
      the Agency’s site guidelines. In particular, sites must be located in eligible
      rural areas; meet community standards regarding utilities, including water and
      wastewater systems; meet street and road access and maintenance requirements;
      and contain other amenities essential to the continued marketability of the
      home. This section addresses each of these standards. 12.3 RURAL AREA DESIGNATION
      [7 CFR 3555.201(a)] Only loans secured by properties located in areas designated
      by the Agency as rural are eligible to receive a loan guarantee. This section
      discusses rural areas designations, how lenders are notified of changes in rural
      area designations, and clarifies rare situations in which loans for properties
      in areas no longer designated as rural may receive a loan guarantee. A. Rural
      Area Definition An area’s rural designation is determined by the Agency and
      may be changed as a result of a periodic review or after the decennial census
      of population. The Agency conducts reviews every five years to identify areas
      that no longer qualify as rural. In areas experiencing rapid growth, and in
      eligible communities within Metropolitan Statistical Areas (MSAs), reviews take
      place every three years. Public notification will be given at HB-1-3555 (03-09-16)
      SPECIAL PN 12-2 Revised (05-05-25) PN 640 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. least 30
      days before the date of the final determination in order to give interested
      parties an adequate chance to comment. Refer to section 3550.10 of 7 CFR 3550
      and HB-1-3550 Chapter 5 for additional information regarding rural area designations.
      In general, rural areas are defined as: x Open country that is not part of,
      or associated with, an urban area; x Any town, village, city, or place, including
      the immediately adjacent densely settled area, which is not part of, or associated
      with, an urban area, and which: o Is rural in character with a population of
      less than 10,000; or o Is not contained within an MSA and has a population above
      10,000 but below 20,000 and has a serious lack of mortgage credit for lower
      and moderate- income families, as determined by the Secretary of Agriculture
      and the Secretary of Housing and Urban Development. Any area classified as “rural”
      or a “rural area” prior to October 1, 1990, and determined not to be “rural”
      or a “rural area” as a result of data received from or after the 1990, 2000,
      2010, or 2020 decennial census, and any area deemed to be a “rural area” any
      time during the period beginning January 1, 2000, and ending December 31, 2020,
      shall continue to be so classified until the receipt of data from the decennial
      census in the year 2030 if such area has a population in excess of 10,000 but
      not in excess of 35,000, is rural in character, and has a serious lack of mortgage
      credit for lower and moderate-income families. x Two or more towns, villages,
      cities, or places that are contiguous may be considered separately for a rural
      designation if they are not otherwise associated with each other and their densely
      settled areas are not contiguous. B. Notification of Rural Area Designation
      The public website noted below provides an automated system to allow users to
      enter an address to determine property eligibility. Users who utilize the public
      website will receive one of three property eligibility decisions when an actual
      address is entered – “Eligible,” “Ineligible,” or “Unable to Determine.” In
      areas not clearly delineated, users will receive an “Unable to Determine.” With
      this type of determination, the lender must confirm with Agency staff the property
      is located in a rural area and is eligible for a HB-1-3555 (03-09-16) SPECIAL
      PN 12-3 Revised (05-05-25) PN 640 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. guarantee prior
      to requesting an appraisal. USDA Rural Development Property and Income Eligibility
      Website: https://eligibility.sc.egov.usda.gov. Attachment 12-A of this Chapter
      provides guidance on utilizing the public website to determine eligible rural
      areas. C. Making Loans in Areas Changed to Non-rural If an area’s designation
      changes from rural to non-rural, loans that meet the following criteria may
      be approved in that area: x Purchase transactions are eligible if the following
      requirements are met: o The application is dated and received by the lender
      prior to the area designation change; o The Loan Estimate was issued within
      three days of the application date; o The purchase contract is ratified prior
      to the date of the area designation change; and o The applicant and property
      meet all other loan eligibility requirements. x Existing Conditional Commitments
      that have been issued will be honored provided the commitment was issued prior
      to the area designation change; x Existing direct and guaranteed loans that
      meet all requirements, as outlined in Chapter 6, remain eligible for refinance
      transactions; x REO properties sold from Agency inventory remain eligible for
      purchase transactions; x SFHGLP REO property sales and transfers with assumption
      may be processed in areas that have changed to non-rural; and x A supplemental
      loan may be made in conjunction with a transfer and assumption HB-1-3555 (03-09-16)
      SPECIAL PN 12-4 Revised (05-05-25) PN 640 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. of a guaranteed
      loan. 12.4 SITE REQUIREMENTS [7 CFR 3555.201(b)] A qualified property must be
      predominately residential in use, character, and design. Sites must be developed
      in accordance with any standards imposed by a State or local government. Therefore,
      the lender must verify that the following requirements are met at the time of
      application. x Site size. There is no specific limitation to the size/acreage
      of the site. The appraiser must provide an explanation in the addendum of the
      appraisal to explain adjustments to comparable properties, how the subject compares
      to other single family sites in the area, etc. x Income-Producing Buildings.
      The property must not include buildings principally used for income-producing
      purposes. Barns, silos, commercial greenhouses, or livestock facilities used
      primarily for the production of agricultural, farming, or commercial enterprise
      are ineligible. However, barns, silos, livestock facilities, or greenhouses
      no longer in use for a commercial operation, which will be used for storage,
      do not render the property ineligible. Outbuildings such as storage sheds and
      non-commercial workshops are permitted if they are not used primarily for an
      income producing, agricultural, farming, or commercial enterprise. A minimal
      income-producing activity, such as maintaining a garden that generates a small
      amount of additional income, does not violate this requirement. Home-based operations
      such as childcare, product sales, or craft production that do not require specific
      commercial real estate features are not restricted. x Accessory Dwelling Unit.
      An Accessory Dwelling Unit (ADU) refers to a habitable living unit, within,
      or detached from a single family dwelling, which together constitute a single
      interest in real estate. The presence of a single ADU does not automatically
      render the property ineligible. Design features such as converted portions of
      existing homes that include a kitchenette or additional attached living area
      (e.g., bedroom and/or bathroom) without a separate address or independent utilities
      (e.g., water, gas, electricity) are not restricted, provided they function in
      support of only the household members. ADUs which function in support of the
      household members, such as multigenerational households, are consistent with
      the objective of this program, however those designed to create a HB-1-3555
      (03-09-16) SPECIAL PN 12-5 Revised (05-05-25) PN 640 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.
      potential rental income stream are not. The appraiser will determine if the
      ADU represents a second single family housing dwelling unit. The appraiser must
      document the highest and best use considering all property characteristics,
      including the status of the utilities if they are separate, when making this
      determination. The appraiser will include their evaluation in the site analysis
      and highest and best use section of the appraisal report, as applicable. x Income-Producing
      Land. The site must not have income-producing land that will be used principally
      for income producing purposes. Vacant land or properties used primarily for
      agricultural, farming, or commercial enterprise are ineligible. A residential
      site that houses a minimal income producing feature such as a windmill, billboard,
      cell phone tower, etc. located on the property does not render the site income-producing.
      These features are typically maintained with a legal agreement and generate
      a minimal amount of additional income. The lender will review the available
      documentation and income received in accordance with the requirements in Chapter
      9 for the purpose of calculating annual household income, as applicable. x Multiple
      Parcels. The lender will ensure the mortgage provides a valid first lien covering
      each parcel. Each parcel must be conveyed in its entirety and have the same
      basic zoning. The entire property will contain only one dwelling but may have
      non-residential, non-income producing buildings, such as a garage. An improvement
      that has been built across lot lines is acceptable. For example, a home built
      across both parcels where the lot line runs under the home. Parcels divided
      by a road, that would otherwise be contiguous, are acceptable. x Properties
      with Solar Panels. Dwellings with solar panels are not considered an income
      producing property. If the property owner (seller) is the owner of the solar
      panels and the solar panels will be included as part of the purchase transaction,
      then standard eligibility requirements apply (i.e. appraisal, insurance, and
      title). If the solar panels are subject to a lease agreement, power purchase
      agreement (PPA), or similar type of agreement, the following requirements apply:
      o Leases and contracts will vary by company and should be considered on a case
      by case basis to ensure all terms/regulations are met. o First lien position,
      by the lender, should be protected and maintained. HB-1-3555 (03-09-16) SPECIAL
      PN 12-6 Revised (05-05-25) PN 640 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. o The property
      should maintain access to an alternative source of electric/gas power that meets
      community standards. o The energy company or lessee should not block any foreclosure
      or servicing actions. o If an agreement for an energy system lease or PPA could
      cause restriction upon transfer of the house, the property is subject to impermissible
      legal restrictions and is generally ineligible for the guaranteed loan. o The
      lease agreement or PPA should indicate that any damage that occurs as a result
      of installation, malfunction, manufacturing defect, or the removal of the solar
      panels is the responsibility of the owner of the equipment, and the owner is
      obligated to repair the damage and return the improvements to their original
      or prior condition. o The lease agreement, PPA, or other agreement should indicate
      that the owner of the solar panels cannot be a loss payee on the homeowner’s
      insurance policy. o If a lease includes payment for equipment, it should be
      considered a debt and included in the total debt ratio. See Chapter 11 for additional
      guidance. o Leased solar panels are considered personal property and are not
      included in the appraised value. o Properties with Property Assessed Clean Energy
      (PACE) loans or assessments are ineligible for a SFHGLP loan. x Site Specifications.
      The site must be contiguous to and have direct access from a street, road, or
      driveway. Streets and roads must be hard surfaced, or all weather surfaced,
      with public access or permanent recorded easements. x Utilities. The site must
      be supported by adequate utilities and water and wastewater disposal systems.
      x Zoning. The property must comply with applicable zoning requirements and HB-1-3555
      (03-09-16) SPECIAL PN 12-7 Revised (05-05-25) PN 640 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.
      restrictions. If an existing property does not comply with all current zoning
      ordinances but it is accepted by the local zoning authority, the appraiser must
      report the property as legal non-conforming. The appraisal must reflect any
      adverse effect of the legal nonconforming use on the value and marketability
      of the property. SECTION 2: APPRAISALS [7 CFR 3555.107(d)] 12.5 RESIDENTIAL
      APPRAISAL REPORTS Approved lenders must ensure appraisals are completed by a
      qualified appraiser that is independent and objective. Approved lenders are
      responsible to review all appraisals for integrity, accuracy, and thoroughness,
      prior to submission of a complete loan application package to USDA. The lender
      may pass the cost of the appraisal on to the borrower. The appraisal must have
      been completed within 180 days of loan closing. Appraisals that are older than
      180 days prior to loan closing are eligible for an appraisal update as indicated
      in this Chapter. A. Qualified Appraiser Approved lenders must select qualified
      and competent appraisers that are properly licensed or certified, as appropriate,
      in the State in which the property is located. The appraiser must comply with
      the current edition of the Uniform Standards of Professional Appraisal Practice
      (USPAP). Lenders may verify that an appraiser is licensed or certified by checking
      the Appraisal Subcommittee website found at www.asc.gov/appraiser. B. Appraisal
      Report All appraisals must comply with the reporting requirements of USPAP available
      at www.appraisalfoundation.org. All appraisal reports must meet the Uniform
      Appraisal Dataset (UAD) requirements set forth by Fannie Mae and Freddie Mac.
      To read definitions of condition and quality ratings, refer to the Fannie Mae
      and Freddie Mac Uniform Appraisal Dataset, located online at: https://singlefamily.fanniemae.com/delivering/uniform-mortgage-data-program/uniform-
      appraisal-dataset. The appraiser will utilize the most current residential appraisal
      forms acceptable to Fannie Mae, Freddie Mac, HUD, or VA. HB-1-3555 (03-09-16)
      SPECIAL PN 12-8 Revised (05-05-25) PN 640 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. Appraisal
      considerations: x Appraiser/client confidentiality under USPAP Ethics Rules
      does not permit the appraiser to discuss the appraisal with anyone other than
      the client, without the client’s permission. It is recommended, but not required,
      that USDA/RD be identified as an intended user with the lender in the appraisal
      report obtained. x The market or sales comparison approach is required in all
      cases. No less than three comparable sales will be used unless the appraiser
      provides documentation that such comparable sales are not available. The appraiser
      must use their knowledge of the area and apply good judgment in the selection
      of comparable sales that are the best indicators of value for the subject property.
      x The appraiser will determine if the cost approach is required. For example,
      the property is unique, has specialized improvements, is new manufactured housing,
      or if the client requests the cost approach to be completed, then the appraiser
      will identify the source of the cost estimates and will comment on the methodology
      used to estimate depreciation, effective age, and remaining economic life. x
      The income approach is only required if the appraiser determines that it is
      necessary to develop credible assignment results. x An appraisal prepared for
      REO purposes, loan servicing consideration, or any other purpose other than
      the guaranteed purchase or refinance transaction is ineligible to be used in
      the origination of a guaranteed loan. A new appraisal with the intent to arrive
      at an opinion of value for a purchase transaction must be obtained. Photographs.
      Photographs in the appraisal report must be in color and be clear and descriptive
      to identify the property’s condition and quality. Photographs must clearly represent
      the improvements, any physical deterioration of the property, amenities, conditions,
      and external influences that may have a material effect on the market value
      or marketability of the subject property. Lenders will upload the appraisal
      report at the Application Documents page in the Agency’s automated underwriting
      system, GUS, by selecting 10002 Appraisal Report and uploading as an individual
      document. An appraisal report with interior and exterior inspection of the subject
      property must include at least the following: HB-1-3555 (03-09-16) SPECIAL PN
      12-9 Revised (05-05-25) PN 640 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. x A front view
      of the subject property; x A rear view of the subject property; x A street scene
      identifying the location of the subject property and showing neighboring improvements;
      x The kitchen, main living area, bathrooms, bedrooms; x Any other rooms representing
      overall condition, recent updates, such as restoration, remodeling, and renovation;
      x Basement, including all finished and unfinished rooms; x Attic and/or crawl
      space when it can be safely accessed without disturbing or moving items that
      obstruct access or visibility; x Comparable sales, listings, and/or pending
      sales utilized in the valuation analysis must include at least a front view
      of each comparable utilized; x The HUD Data Plate and the HUD Certification
      Label(s) for manufactured homes; and x Condominium projects should include additional
      photographs of the common areas and shared amenities. Appraisal transfer. An
      appraisal ordered by another lender for the applicant can be transferred to
      the lender who will complete the purchase transaction. The initial lender must
      agree to the transfer of the report. A letter from the initial lender who ordered
      the appraisal report must be retained in the permanent loan file as evidence
      the initial lender transferred the report to the lender completing the purchase
      transaction. The receiving lender must assume full responsibility for the integrity,
      accuracy, and thoroughness of the appraisal report, including the methods that
      the original lender used to acquire the appraisal. The appraisal report must
      be no older than 180 days at loan closing to be valid. Appraisal update. The
      validity period of an appraisal report can be extended only one time with an
      Appraisal Update Report. The appraisal may be expired at the time the appraisal
      update is requested. However, when the original appraisal is subsequently HB-1-3555
      (03-09-16) SPECIAL PN 12-10 Revised (05-05-25) PN 640 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.
      updated, the appraisal is valid for no greater than one year from the effective
      date of the original appraisal report at loan closing. The purpose of an appraisal
      update request is to determine if the property has declined in value since the
      effective date of the original appraisal. An update is not eligible to support
      a higher appraised value of the property. USPAP considers the term “Appraisal
      Update” as a business term, but regardless of the nomenclature used, when a
      client seeks a more current value or analysis of a property that was the subject
      of a prior assignment, this is not an extension of that prior assignment that
      was already completed; it is simply a new assignment. Refer to USPAP Advisory
      Opinion 3 for additional clarification, available at www.appraisalfoundation.org.
      USPAP (Advisory Opinion 3) states that there are three ways that the reporting
      requirements can be satisfied for this type of assignment: 1. Provide a new
      report that contains all the necessary information/analysis to satisfy the applicable
      reporting requirements, without incorporation of the prior report by either
      attachment or reference. 2. Provide a new report that incorporates by attachment
      specified information/analysis from the prior report so that, in combination,
      the attached portions and the new information/analysis added satisfies the applicable
      reporting requirements. 3. Provide a new report that incorporates by reference
      specified information/analysis from the prior report so that, in combination,
      the referenced portions and the new information/analysis added satisfies the
      applicable reporting requirements. The appraiser may use a pre-printed form
      or a narrative report to provide the appraisal update, but whichever reporting
      format is used, it must be in compliance with USPAP. Fannie Mae Form 1004D/Freddie
      Mac Form 442, Appraisal Update and/or Completion Report, may be utilized by
      the lender to report the completion of a repair and/or satisfaction of requirements
      and conditions noted in the original appraisal report. Property flipping. It
      remains the lenders responsibility to ensure any recently sold property’s value
      is strongly supported when a significant increase between sales occur. The lender
      must perform a thorough review of the appraisal report to validate and support
      the property’s value and protect the applicants from possible predatory real
      estate lending. HB-1-3555 (03-09-16) SPECIAL PN 12-11 Revised (05-05-25) PN
      640 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. C. Agency Review The Agency will review appraisals
      for all guarantee loan requests by completing Form RD 1922-15, Administrative
      Appraisal Review. If the Agency reviewer detects concerns, the appraisal will
      be referred to an Agency Review Appraiser for a technical desk or technical
      field review. Should the Agency licensed appraisers determine the appraisal
      is not adequate, the lender will be informed of corrections needed prior to
      issuance of the Conditional Commitment for Loan Guarantee. The lender will be
      required to correct or complete any appraisal returned by the Agency for corrective
      action. The lender is responsible to communicate and initiate corrective action
      with the appraiser. The corrected appraisal will be subject to the same review
      process described in this section. The Agency retains the right to determine
      an appraiser is ineligible based upon their failure to comply with requirements
      of this section. The Agency will notify the lender when appraisals completed
      by ineligible appraisers will no longer be accepted for the SFHGLP. D. Directors
      of the Origination and Processing Division Responsibilities A director of the
      Origination and Processing Division (OPD) will designate or delegate authority
      to the supervisory staff of the unit or other qualified personnel to conduct
      administrative appraisal reviews. Technical appraisal reviews must be completed
      by an Agency certified or licensed appraiser and need only be licensed or certified
      in one State or territory to perform real estate appraisal duties as Federal
      employees in all states and territories. Review appraisers must have recent,
      documented appraisal experience or other factors which clearly establish their
      qualifications as a reviewer. A director of the OPD will determine and establish
      the training needs for Rural Development OPD staff completing appraisal reviews.
      A director of the OPD will also assure that an adequate number of reviews are
      being completed. E. Types of Agency Reviews There are three types of reviews
      for appraisals: “Administrative,” “Technical Desk,” and “Technical Field.” An
      administrative review will be completed for all transactions involving the submittal
      of an appraisal report. A sufficient number of technical desk and technical
      field reviews will be completed to ensure the Agency is getting quality HB-1-3555
      (03-09-16) SPECIAL PN 12-12 Revised (05-05-25) PN 640 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.
      appraisals for the Guaranteed Loan Program. An explanation of the review types
      are as follows: 1. Administrative Reviews Administrative reviews are performed
      by the Agency loan approval official or qualified designee on all appraisals
      prior to issuance of the Conditional Commitment. This review determines if there
      are inconsistencies in the appraisal report that may have to be addressed, or
      if a technical review should be completed by the Agency staff appraiser prior
      to issuance of the Loan Note Guarantee. Indicators that a technical review may
      be required will be documented on Form RD 1922-15. x Administrative reviews
      are completed by the Agency on Form RD 1922-15. This form will be signed, dated,
      and retained in the Agency file for uploading. This review should be completed
      prior to issuance of the Conditional Commitment. x If there is a deficiency
      with an appraisal, the loan approval official should communicate the deficiency
      to the lender. These deficiencies should include items that affect loan security,
      value conclusions, or unacceptable property conditions. 2. Technical Desk Reviews
      A technical desk review is performed to determine whether the appraisal was
      complete, was clearly reasoned, and had adequate support for the conclusion
      of value. Technical reviews are performed by the Agency Appraiser. Technical
      reviews completed by Agency appraisers must follow current USPAP guidelines.
      x Technical desk reviews may be documented in any format that complies with
      USPAP and is acceptable for use by RD. Technical reviews should be selected
      in a random method. The percent of files randomly selected will be set by the
      direction of the SFHGLP. A director of the OPD, the Quality Assurance and Lender
      Oversight Division, or designated supervisory staff, will coordinate with Program
      Support Staff (PSS) in National Headquarters to establish internal management
      controls and systems to document and substantiate residential appraisal compliance
      activities, which will be HB-1-3555 (03-09-16) SPECIAL PN 12-13 Revised (05-05-25)
      PN 640 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. evaluated during Internal Control Reviews,
      Single Family Housing program reviews, and other similar types of reviews. Technical
      desk reviews of appraisals received by the Agency provide a method of internal
      control by the appraisal review staff and ensure that appraisals received by
      the Agency are in compliance with USPAP and Agency regulations. A Director of
      the OPD, or designated supervisory staff, will support completion of technical
      desk reviews in coordination with PSS to achieve the appraisal quality control
      requirements of the Agency. A technical review may also be requested by OPD
      staff when problems are detected on the administrative review that cannot or
      will not be addressed by the submitting lender or original appraiser. These
      problems must be significant and result in an appraisal which does not support
      the value conclusion. OPD staff will document the nature of their concerns on
      Form RD 1922-15. The appraisal will then be forwarded to the Appraisal Services
      Branch for a technical and/or field review prior to approval of the loan. 3.
      Technical Field Reviews Field reviews will involve on-site visits to the subject
      property and the comparable properties used in the report. Field reviews are
      completed by Agency Appraisal staff on a random, spot-check basis to determine
      if the appraiser has followed accepted appraisal techniques and arrived at a
      logical conclusion. x USPAP Standard 3 Review is used for technical field reviews.
      The reviewer may use any reporting format that complies with USPAP and is acceptable
      for use by RD. A director of the OPD, or designated supervisory staff, and the
      appraisal review staff are responsible for the administration of residential
      appraisal compliance and training. Appropriate actions will be initiated by
      a director of the OPD, or designated supervisory staff, and appraisal review
      staff to ensure compliance with USPAP and SFHGLP policies governing the residential
      appraisal process. F. Appraisals in Remote Rural Areas, on Tribal Lands, or
      in Areas Lacking Market Activity In remote, rural areas, on Tribal lands, or
      areas with a lack of market activity, as identified by the Agency, it may be
      difficult to obtain adequate comparable sales to appraise a property. When the
      sales comparison approach cannot be developed for a HB-1-3555 (03-09-16) SPECIAL
      PN 12-14 Revised (05-05-25) PN 640 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. credible opinion
      or conclusions regarding value, the lender’s appraiser may use other methods
      in compliance with the Uniform Standards of Professional Appraisal Practice
      (USPAP) and perform an appraisal without completing the sales comparison approach
      to value. Appraisers must explain the exclusion of the sales comparison approach
      to value and document their efforts to obtain comparable market data along with
      an explanation for any sales data not used. The primary method that the appraiser
      is relying on should be summarized to the extent that the user or a review appraiser
      can understand the reasoning and support of the valuation and conclusions. Remote
      rural areas are identified by the Agency and are defined as areas with all the
      following characteristics: x Scattered population; x Low density of residences;
      x Lack of basic shopping facilities; x Lack of community and public services
      and facilities; and x Lack of comparable sales data. If the appraiser is using
      the cost approach, external depreciation based on the remoteness of the site
      must not be considered; however, factors that impact the site such as immediate
      proximity to a feedlot, factory, or other similar considerations should be included.
      If the appraiser is using the income approach, they must explain why the income
      and expenses used are comparable to the subject property. When a market is established
      in these areas, the Agency will again require the sales comparison approach
      to be used. 12.6 WATER AND WASTEWATER DISPOSAL SYSTEMS [7 CFR 3555.201] The
      site must have acceptable water and wastewater disposal systems to ensure the
      property is decent, safe, sanitary, and meets community standards. Public water
      and wastewater disposal systems are presumed to meet state and local requirements
      with no additional documentation or inspections. Private well and wastewater
      systems that meet the requirements in HUD Handbook 4000.1 or meet the requirements
      of local and/or state health authority do not require additional inspections
      other than water purity tests as HB-1-3555 (03-09-16) SPECIAL PN 12-15 Revised
      (05-05-25) PN 640 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. discussed in this section. Evidence
      will be retained in the lender’s permanent loan file. A. Water Water systems,
      for existing or new construction, that require continuous or repetitive treatment
      to be safe bacterially or chemically may be used if the individual water system,
      with purification, meets the requirements of the state department of health
      or other comparable reviewing and regulatory authority. 1. Individual Privately
      Owned x Individual water systems are owned and maintained by the homeowner and
      subject to compliance with all requirements of the local and/or State Health
      Authority codes. Water quality tests are required as follows: o The water quality
      of the well must meet the requirements of the state or local authority. If the
      state or local authority does not have specific requirements, the maximum contaminant
      levels established by the Environmental Protection Agency (EPA) will apply.
      o The local health authority or a state certified laboratory must perform a
      water quality analysis. The Safe Water Drinking Act does not apply to private
      wells. Contact the EPA’s Safe Drinking Water Hotline at (800) 426-4791 for referral
      to certified labs and other inquiries. o The water analysis report must be no
      greater than 180 days old at loan closing. If the Agency is aware of any recent
      environmental impacts that may render the previous analysis invalid (for example
      – chemical spills, natural disasters, etc.) a new report may be required. x
      The well location for individual water supply systems must be measured to establish
      the distance from the septic system. The separation distance between the well
      and septic systems must meet the SF Handbook (HUD Handbook 4000.1) or be found
      acceptable by the Local and/or State Health Authority. x Individual water systems/wells
      should be located on the subject property site. If located on an adjacent property,
      evidence of water rights and recorded HB-1-3555 (03-09-16) SPECIAL PN 12-16
      Revised (05-05-25) PN 640 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. maintenance agreement
      must be retained in the lender’s permanent loan file as acceptance of the well
      as the primary source of water. 2. Individual Privately Owned Shared If the
      property is served by a shared well or off-site facility, the lender must ensure
      the private system will provide a continuous and adequate supply of safe and
      potable water. The following requirements must also be met: x The well serves
      properties that cannot feasibly be connected to an acceptable public or community
      water supply system. It is the lender’s responsibility to make this determination.
      x A shared well must have a valve on each dwelling. x The water supply is adequate
      for all families served. A shared well must service no more than four living
      units or properties unless approved and enforced by the local code authority.
      x The water quality of the well must meet the requirements of the state or local
      authority. If the state or local authority does not have specific requirements,
      the maximum contaminant levels established by the Environmental Protection Agency
      (EPA) will apply. x The well must have an agreement that meets the following
      requirements: o Is binding upon all signatory parties and their successors in
      title; o Is recorded or will be recorded no later than the closing date; and
      o Makes provisions for maintenance and repair of the system and the sharing
      of costs to do so. These provisions must include a permanent easement that allows
      access for maintenance and repair. 3. Community Owned If the property is served
      by a community water system operated by a private corporation or nonprofit property
      owner’s association, the lender must ensure the HB-1-3555 (03-09-16) SPECIAL
      PN 12-17 Revised (05-05-25) PN 640 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. following conditions
      are met: x The system and the water supply meet all applicable federal, state,
      and local requirements. x The system has the capacity to provide a sufficient
      water supply during periods of peak demand. x The system is operated under a
      legally binding agreement that allows interested third parties to enforce the
      obligation of the operator to provide satisfactory service. 4. Required Inspections
      and Documentation The lender must obtain documentation the water quality meets
      state and local standards as discussed in this section. Lenders will retain
      all documentation in their permanent loan file. 5. Individual Water Systems
      in Hawaii and the Western Pacific Region Due to the limited regulation provided
      by local ordinances and/or regulations of each jurisdiction in Hawaii and the
      Western Pacific Region regarding individual water systems (IWS), including rainwater
      catchment systems, the Agency has determined that an IWS is considered an eligible
      water system if the following conditions are met: x The property is located
      in Hawaii or the Western Pacific Region; x The property does not have an available
      affordable connection to a public or private community water system; x The alternative
      water supply system, rainwater catchment system, complies with and/or is not
      prohibited by ordinances and/or regulations of the local jurisdiction in which
      the property is located; x Water quality tests are not required if the state
      or local authority does not have specific requirements and EPA testing is not
      available; HB-1-3555 (03-09-16) SPECIAL PN 12-18 Revised (05-05-25) PN 640 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. x Reliance upon the rainwater catchment system does not diminish the
      marketability or value of the property within its marketplace. The system must
      be typical for the area as described by the appraiser; and x The applicant is
      required to acknowledge and certify of their responsibility to maintain the
      rain catchment system. B. Wastewater 1. Individual Privately Owned The lender
      is required to obtain a septic evaluation. A qualified appraiser who certifies
      the property meets required HUD’s Single-Family Housing Policy Handbook, a government
      health authority, a licensed septic system professional, or a qualified home
      inspector may perform the septic evaluation. The septic evaluation may require
      additional inspections as a result of the inspection. The septic system must
      be free of observable evidence of failure. Existing dwellings appraised by a
      qualified appraiser who indicates the dwelling meets the required HUD handbook
      policy does not require further septic certification; however, water supply
      systems must be measured to establish the distance from the septic system. The
      separation distance between the well and septic systems must meet the SF Handbook
      (HUD Handbook 4000.1) or be found acceptable by the local and/or State Health
      Authority. If the property is served by an individual sewage disposal system,
      the lender must ensure the system: x Meets any applicable requirements of the
      state or local health authority with jurisdiction; x Is located entirely on
      the subject property. If any part of the system is located on an adjacent property
      (for example leach lines), evidence such as a perpetual encroachment easement
      must be recorded to establish the rights of HB-1-3555 (03-09-16) SPECIAL PN
      12-19 Revised (05-05-25) PN 640 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 property owner’s
      permitted use; and x Is operating properly and has the capacity to dispose of
      all domestic wastes in a manner that will not create a nuisance or endanger
      public health. 2. Community Owned If the property is served by a community wastewater
      system operated by a private corporation or nonprofit property owner’s association,
      the lender must ensure that the system: x Meets any applicable requirements
      of the state or local health authority with jurisdiction; x Is licensed, operating
      properly, and has the capacity to dispose of all domestic wastes in a manner
      that will not create a nuisance or endanger public health; and x Is subject
      to a legally binding agreement that allows interested third parties to enforce
      the obligation of the operator to provide satisfactory service. 3. Required
      Inspections and Documentation The lender must obtain documentation the wastewater
      system meets state and/or local standards. Lenders will retain all documentation
      in their permanent loan file. 12.7 STREET ACCESS AND ROAD MAINTENANCE [7 CFR
      3555.201] A. Access The site must be contiguous to, and have direct access from,
      a public or private street, road, or driveway. Private roads or streets are
      acceptable provided each property has vehicular or pedestrian access. Private
      roads or streets must be protected by permanent recorded easement (non-exclusive
      and non-revocable easement without trespass from the property to a public street)
      or the street must be maintained by a homeowner’s association (HOA). Shared
      driveways must also meet these requirements requiring a permanent recorded easement
      for ingress and egress. This agreement must be binding to successors and title.
      A copy of a title report, retained in the lender’s loan file, may be used to
      HB-1-3555 (03-09-16) SPECIAL PN 12-20 Revised (05-05-25) PN 640 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. evidence the easement. Private streets must have a permanently recorded
      easement or be owned and maintained by an HOA. All evidence of recorded easements
      or maintenance agreements must be reviewed and approved by the approved lender’s
      underwriter and documented in the lender’s permanent loan file. B. Maintenance
      Streets and roads must be hard surfaced or all-weather surfaced. An all-weather
      surface is a road surface over which emergency and the area’s typical passenger
      vehicles can always pass. A publicly maintained road is automatically assumed
      to meet this requirement. If a HOA is responsible for maintaining streets and
      roads, it must meet the criteria set forth by Fannie Mae, Freddie Mac, the U.S.
      Department of Housing and Urban Development (HUD), or U.S. Department of Veterans
      Affairs (VA). SECTION 3: DWELLING REQUIREMENTS [7 CFR 3555.202]'
  judgment: false
