The purpose of this announcement is to clarify Agency requirements for routine charges and fees that lenders may charge borrowers. The Agency wishes to prevent lenders from charging excessive fees for guaranteed loans and to protect low- and moderate-income borrowers from paying excessive loan fees, or borrowing funds for fees that are not reasonable and customary. This announcement does not apply to maximum interest rate requirements.

Individual Guaranteed Rural Housing (GRH) lenders are expected to assess charges and fees for GRH loans that are no greater than those they charge other applicants for similar type transactions. While most lenders comply with the requirements for charging fees that are reasonable and customary, cases have arisen where lender fees have been abnormally high. Lender charges and fees may generally consist of appraisal fees, attorney fees, broker fees, and other fees associated with originating and closing a Single Family Housing real estate loan.

Rural Housing Service considers loans guaranteed under the Single Family Housing Guaranteed Loan Program (SFHGLP) to be similar to loans insured or guaranteed by the Federal Housing Administration (FHA) or by the Department of Veterans Affairs (VA). Fees charged by a lender to borrowers for loans guaranteed under the SFHGLP should not exceed fees charged by the same lender for loans insured or guaranteed by the FHA or VA. Other high loan-to-value home mortgage products can also be used for comparison.

The Agency reviews loan applications for completeness and to determine whether the proposed loan is to an eligible applicant for an eligible loan purpose. If when reviewing loan applications the Agency determines that a lender proposes to charge fees or use loan funds to pay for fees that appear questionable or too high, the Agency should ask the lender to justify the fees prior to issuing the conditional commitment. A lender should be able to document that the charges or fees assessed against borrowers whose loans are guaranteed under the SFHGLP do not exceed charges or fees routinely made by the lender for similar transactions such as FHA or VA loans.

In addition, during lender compliance reviews, GRH loan program settlement statements should be reviewed in an effort to ensure that GRH program borrowers are being charged fees that are reasonable and customary, including fees that may not have been part of the GRH loan amount.

Lenders that are determined to be out of compliance should be counseled on the provisions of the regulation and monitored closely for future compliance. Failure to resolve the noncompliance may be considered in termination of lender eligibility.

This announcement  replaces RD AN No. 4217 (1980-D) dated September 26, 2006 and expires September 30, 2008.

Any comments or questions concerning this announcement should be directed to Dave Chaput orJoaquín Tremols at (202) 720-1452. Their respective email addresses are david.chaput@wdc.usda.gov and joaquin.tremols@wdc.usda.gov.

To view the Announcement in its entirety, please click here.

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH  and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 425 employees.  Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico