source:
  type: guide
  id: usda-hb-3555-16.9
  authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.9 —
    Duplicate Loan Note Guarantee
  description: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.9
    — Duplicate Loan Note Guarantee.
  coverage_tier: operative
obligations:
- id: usda-hb-3555-16.9-full
  canonical_id: usda-hb-3555-16.9-full
  section: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.9 — Duplicate
    Loan Note Guarantee
  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 ¶16.9
      — Duplicate Loan Note Guarantee
    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: '16.9 DUPLICATE LOAN NOTE GUARANTEE Lenders can retrieve a reissued
      Loan Note Guarantee from the LLC system. Occasionally a lender may request a
      certified copy or a duplicate original of Form RD 3555-17 or Form RD 3555-17E,
      Loan Note Guarantee. Many investors accept a certified copy, or scanned copy,
      while others require a duplicate original. A lender’s request for a certified
      copy, scanned copy, or duplicate original of Form RD 3555-17 or Form RD 3555-
      17E will be honored. 16.10 TRANSFERRING LOANS AND/OR SERVICING RIGHTS Lenders
      may transfer guaranteed loans to other USDA approved lenders by following the
      requirements described in Chapter 4 of this Handbook. HB 1-3555 (03-09-16) SPECIAL
      PN 16-15 Revised (08-05-25) PN 649 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. 16.11 ACCEPTABLE
      LIEN POSITION The guaranteed loan must have first lien position at closing;
      however, the lender may permit liens junior to the guaranteed loan if: x The
      lien will not interfere with repayment of the loan and has been considered in
      the underwriting process; x The total value of all liens on the property is
      less than or equal to the property’s market value, except when a “soft-second”
      for down payment and/or closing cost assistance creates the overage; and x The
      junior lien is for an authorized loan purpose. 16.12 OWNERSHIP REQUIREMENTS
      A. Lender and Agency Responsibilities After closing, the lender must compare
      the deed of trust or real estate mortgage with the title opinion to assess lien
      priority, assure the collateral is accurately covered, verify the date and time
      of recording, and ensure that the loan closing instructions have been followed.
      The Agency does not set policy for survey requirements; however, it is the lender’s
      responsibility to ensure that ownership interest that protects the security
      property has been obtained after the loan is closed. If the borrower defaults
      on the loan, the lender must be able to foreclose on the property to settle
      the debt. If the lender failed to obtain all required security, the originating
      lender may be subject to indemnification if a loss claim request is made to
      reflect the lender’s failure to meet the lien requirements. B. Acceptable Forms
      of Ownership The two forms of ownership acceptable to the Agency are fee-simple
      and secure leasehold. 1. Fee-Simple Ownership Acceptable fee-simple ownership
      is evidenced by a fully marketable title with a deed HB 1-3555 (03-09-16) SPECIAL
      PN 16-16 Revised (08-05-25) PN 649 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. vesting a fee-simple
      interest in the property to the borrower. 2. Secure Leasehold Interest Although
      fee-simple ownership is preferable, the borrower may have a secure leasehold
      interest in the property. Leasehold interests are acceptable when all the following
      conditions are met: x The applicant must be unable to obtain fee-simple title
      to the property; x The rent charged for the lease must not exceed the rate paid
      for comparable leases; and x The appraisal documents these conditions. The lessor
      must own the fee-simple title. This provision does not apply to a lessor who
      is a Native American possessing a leasehold interest on restricted land. Trust
      or restricted land must remain in trust or restricted status. In these cases,
      the mortgage, deed of trust, leasehold interest, or other security interest
      must be approved by the Secretary of the Interior. For those loans to Native
      Americans on restricted or trust land, the lender must obtain: x Evidence that
      the tribe has enacted legally binding and effective foreclosure procedures and
      will enforce those procedures upon notice of default from a lender. x Evidence
      that the tribe has enacted legally binding and effective eviction procedures
      and will enforce those procedures upon notice of default from a lender. x Evidence
      that the tribe has adopted procedures ensuring that the guaranteed loan will
      always have first lien priority (if applicable) and will be satisfied before
      all other property debts (excepting tribal taxes) OR has adopted legislation
      requiring the tribe to follow state or local priority of lien procedures. x
      A copy of the tribe’s lease for use on residential land. HB 1-3555 (03-09-16)
      SPECIAL PN 16-17 Revised (08-05-25) PN 649 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 The lender
      will adhere to the tribe’s mortgage, foreclosure and eviction ordinances and
      the terms of the lease and the lender can only sell the leasehold interest to
      the tribe, the tribally designated housing entity, or another tribal member.
      The lender and RD staff should consult with the tribe to ensure they adhere
      to the tribe’s ordinances, the terms of the lease, and may exercise flexibility
      as directed by the tribe. The Agency’s Native American Coordinators should also
      be contacted for additional assistance. For all other leasehold interest: x
      Leasehold estates are an accepted practice and readily marketable in the area
      where the subject property is located. x Neither the leasehold nor the fee-simple
      title may be subject to a prior lien unless the Agency authorizes acceptance
      of the prior lien before loan approval. x The lease must be in writing, recorded,
      and contain all the following provisions: o The lessor’s consent to allow the
      lender’s mortgage. o The right of the lender to foreclose and sell the property
      without restrictions that adversely affect the market value of the property.
      o The right of the lender to bid at a foreclosure sale or to accept voluntary
      conveyance of the property in lieu of foreclosure. o The right of the lender
      to occupy, sublet, or sell the property should the leasehold be acquired through
      foreclosure, voluntary conveyance, or abandonment. o The right of the borrower
      to transfer the leasehold and lender mortgage to an eligible transferee who
      will assume the lender’s debt if the borrower defaults or is unable to continue
      with the lease. HB 1-3555 (03-09-16) SPECIAL PN 16-18 Revised (08-05-25) PN
      649 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 A negotiated agreement with the lessor before
      the leasehold interest is approved regarding the lender’s obligation to satisfy
      unpaid rent or other charges accrued before or during the time the lender has
      possession of or title to the leasehold. During negotiations, the lender should
      consider the length of time it will take to foreclose, how much the Agency would
      be responsible for, and when the lender would have to pay. o Fair compensation
      to the borrower for any part of the property taken by condemnation. o The unexpired
      term of the lease must be at least 150 percent of the term of the mortgage.
      x The language regarding amendments to mortgages with leasehold interests, specified
      in Attachment 16-A of this Chapter, must be inserted in the mortgage. C. Insurance
      Policy Requirements 1. Hazard Insurance Until loans are paid in full, lenders
      must ensure that borrowers continuously maintain hazard insurance on the collateral
      to protect against fire and weather- related damage. A hazard insurance policy
      must be in force at the time the loan is closed. A policy must document if the
      dwelling is on a leasehold to ensure state laws regarding insurance requirements
      are met. Lenders should adopt accepted industry standards for hazard insurance
      as noted below: x Hazard insurance providers should have ratings in accordance
      with the most recent Government Sponsored Enterprise (GSE) requirements. x Hazard
      insurance policies should conform to the GSE coverage requirements of “the standard
      extended coverage endorsement,” which states that a policy cannot be accepted
      that in whole or part excludes wind, hurricane, or catastrophe insurance unless
      the coverage is provided in another policy with HB 1-3555 (03-09-16) SPECIAL
      PN 16-19 Revised (08-05-25) PN 649 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 same coverage
      limits as the hazard policy. Properties should have replacement cost coverage
      in an amount that is at least equal to the guaranteed value of the improvements
      or the unpaid principal balance. Deductible(s) should not exceed 5% of the total
      coverage amount. When using a high deductible, lenders must be mindful of the
      applicant’s repayment ability and ensure that chosen deductibles are reasonable
      for the applicant and will not cause undue hardship on the borrower. 2. Flood
      Insurance If a dwelling is in a Special Flood Hazard Area (SFHA) as identified
      by the FEMA, the property must be located within a National Flood Insurance
      Program (NFIP) participating community and the borrower must obtain flood insurance.
      The lender must ensure the borrower continuously maintains flood insurance for
      the life of the loan and that the policy is in force at the time of loan closing.
      Flood insurance must cover the lesser of the outstanding principal balance of
      the loan or the maximum amount of coverage allowed under NFIP. Unless a higher
      amount is allowed by state or federal law (which includes FEMA policies), the
      maximum deductible clause for a flood insurance policy should not exceed $10,000.
      Existing dwellings are eligible for the SFHGLP if flood insurance is available.
      When using a high deductible, lenders must be mindful of the applicant’s repayment
      ability and ensure that chosen deductibles are reasonable for the applicant
      and will not cause undue hardship on the borrower. HB 1-3555 (03-09-16) SPECIAL
      PN 16-21 Revised (08-05-25) PN 649 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. ATTACHMENT 16-A
      AMENDMENTS TO MORTGAGES WITH LEASEHOLD INTEREST The following paragraphs must
      be inserted in the mortgage. The first paragraph should be placed directly before
      the legal description of the real estate. “All borrower’s right, title, and
      interest in and to the leasehold estate for a term of years beginning on , 20
      , created, executed and established by certain Lease dated , 20 , by , Page
      of Records of said County and State, and any renewals and extensions thereof,
      and all borrower’s right, title, and interest in and to said Lease, covering
      the following real estate.” “Borrower will pay, when due, all rents and all
      other charges required by said Lease, will comply with all other requirements
      of said Lease, and will not surrender or relinquish any of borrower’s right,
      title, or interest in or to said leasehold estate or under said Lease while
      this instrument remains in effect.” HB 1-3555 (03-09-16) SPECIAL PN 16-22 Revised
      (08-05-25) PN 649 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. ATTACHMENT 16-B Guaranteed Loan
      Closing Reference Guide Question Answer I am trying to access the Loan Note
      Guarantee from the Single-Family Housing Lender Administration List page in
      the LLC system, but nothing is coming up when I search for the Borrower/Loan.
      Verify you are using the correct Borrower ID number (default choice), Borrower
      SSN, Name/State, or Lender Loan Number and are selecting “Loans” for the “Request
      Type.” Where can I find instructions for submitting the lender loan closing?
      The “Lender Loan Closing (LLC) Guide” is available in the LINC Training and
      Resource Library, in the “Loan Closing” section. The LINC Training and Resources
      Library is located at https://www.rd.usda.gov/resources/usda-linc- training-resource-library.
      How do I change the LLC roles of my associates? How do I modify or delete Security
      Administrators? The “SFHGLP System Access and Security Guide” is available in
      the LINC Training and Resource Library, in the “Guaranteed Underwriting System”
      section, which includes step by step instructions to add, modify, or delete
      existing users. The LINC Training and Resources Library is located at https://www.rd.usda.gov/resources/usda-linc-training-
      resource-library. It has been over 30 days since the loan closed, but we forgot
      to submit the loan closing package. Is it too late to request a Loan Note Guarantee?
      No. Rural Development will continue to accept complete loan closing submissions
      to assist the lender in obtaining a Loan Note Guarantee. Requests received more
      than 30 days after loan closing must include a loan payment history verifying
      the loan is current, as well as certification that all required escrow accounts
      are current and neither the lender nor another interested party provided funds
      to bring and/or keep the mortgage current to obtain the Loan Note Guarantee.
      A Loan Note Guarantee will not be issued beyond 30 days of the loan closing
      if the account is in default at the time of the Loan Note Guarantee request.
      HB 1-3555 (03-09-16) SPECIAL PN 16-23 Revised (08-05-25) PN 649 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. Question Answer I did not receive the email with a link to the Loan Note
      Guarantee. Can you resend it to me? The Loan Note Guarantee can be accessed
      by the lender anytime once it is issued by USDA. Lenders can retrieve a copy
      from GUS by accessing the Application Documents Page. The Loan Note Guarantee
      is also available via the LLC System by following these steps: x Enter the correct
      Borrower ID number (default choice), Borrower SSN, Name/State, or Lender Loan
      Number. x Select “Loans” for the “Request Type.” x Select “Display Documents”
      from the Action drop- down menu. The status of the loan will be set to “closed.”
      x Select the Borrower ID hyperlink. I think I submitted the loan closing, but
      I am unsure how to confirm. Can you check for me? The easiest way to check on
      a submitted loan closing is to log into GLS and check the “Add/Update Loan Closing”
      screen. Scroll towards the bottom to see if the upfront fee payment information
      is completed/accepted. For searches completed on the same day the lender submitted
      the LLC, the payment will reflect “pending” until the next day. The Loan Note
      Guarantee cannot be issued by USDA until the payment status changes to “settled.”
      HB 1-3555 (03-09-16) SPECIAL PN 16-24 Revised (08-05-25) PN 649 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. Question Answer I submitted the loan closing, but I did not receive the
      loan closing confirmation screen. Our company requires us to print this for
      our files. Is there a way to obtain this? Lenders may obtain a copy of this
      confirmation by going to the Single Family Housing Lender Administration List
      page in the LLC system. Enter the Borrower ID and ensure the “Request Type”
      is set to “Obligations.” When the correct Borrower has been identified, select
      the “Action” as “Lender Loan Closing Confirmation” and click on the Borrower
      ID hyperlink. Unauthorized loan funds were released to the borrower at closing.
      How can we correct this? Lenders have two possible solutions: 1. The lender
      may apply the amount of the unauthorized loan funds to the principal loan balance.
      Documentation of the amount applied must be submitted to USDA. 2. Loan fees
      paid by the applicant(s) with credit cards or other short-term loans may not
      be reimbursed at closing. If the lender is required to reimburse an applicant
      as the result of erroneous preparation of the Loan Estimate, funds may be provided
      directly to the applicant since it represents a penalty due from the lender.
      HB 1-3555 (03-09-16) SPECIAL PN 16-25 Revised (08-05-25) PN 649 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. Question Answer The loan has closed for a higher loan amount and/or interest
      rate than what was authorized on the Conditional Commitment. The Loan Note Guarantee
      has not been issued, what can I do? The lender may perform a loan modification
      to rectify the loan amount and/or interest rate to match the issued Conditional
      Commitment. If that is not an option, the lender must request USDA to release
      the GUS loan back for correction. Once the loan amount and/or interest rate
      has been corrected, a new underwriting submission may be performed, and USDA
      will issue a new Conditional Commitment. Agency staff will follow the loan closing
      reversal guidance found on the SFHGLP SharePoint site when processing these
      requests. I have received the Loan Note Guarantee, but our quality control/investor/etc.
      will not accept the loan until X is corrected. Can you please release the file
      back to me for correction of GUS? No. Once USDA has issued a Loan Note Guarantee,
      GUS will not be released. Loan Note Guarantees will not be revoked. Once they
      are issued, they remain valid per §3555.108(a). The lender may submit a “Self-Report”
      to the Agency for review and response. A self‐report must include: x Borrower
      ID/GUS Application ID and last name to select the correct file; x Description
      of the issue; x Provide supporting documentation, if applicable; and x Lender/Servicer
      contact information. Submit this information via email to SFHGLD.QualityAssurance@usda.gov.
      Response time is dependent on the issue and number of submissions received by
      USDA. It is the responsibility of the lender to ensure their investor will accept
      responses from USDA for investor delivery. HB-1-3555 (03-09-16) SPECIAL PN 16-27
      Revised (08-05-25) PN 649 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. Question Answer I need
      to have GUS released for correction after an automated loan closing has been
      submitted but prior to issuance of the Loan Note Guarantee. Prior to de-obligation
      of funds, Agency employees must ensure that the fiscal year funds utilized for
      the loan were not prior year funds. If the funds are from the current year,
      Agency staff will follow the instructions on how to reverse an LLC transaction
      prior to the issuance of a Loan Note Guarantee found on the SFHGLP SharePoint
      site. Loans obligated with prior year funds cannot be released in GUS. Agency
      staff must follow the guidance in Chapter 14 of this Handbook to process restoration
      of prior fiscal year funds. The Loan must be submitted manually in order to
      be re-obligated. The upfront loan guarantee fee was paid when the lender submitted
      their previous loan closing. When the closing is deleted from GLS, the fee already
      paid does not get returned to the lender. Instead, it goes into a pending state
      until USDA recloses the loan in GLS. Agency staff will not ask the lender to
      resubmit the upfront Guarantee Fee. HB-1-3555 (03-09-16) SPECIAL PN 17-1 Revised
      (04-14-25) PN 637 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. CHAPTER 17: REGULAR SERVICING
      – PERFORMING LOANS 7 CFR 3555.251'
  judgment: false
