HB-1-3555
Attachment 6-A
Page 1 of 2
(03-09-16) SPECIAL PN
Revised (03-31-23) PN 580
REQUIREMENTS FOR ALL REFINANCE OPTIONS
• Only loans financed or guaranteed by USDA are eligible.
• Existing loan must have closed 12 months prior to the request for Conditional Commitment.
• Fixed interest rate and 30-year term.
• Borrower must meet applicable adjusted annual household income.
• No cash out from collateral equity. Only reimbursement of borrower prepaid eligible closing costs and/or
refund from escrow overage.
• Borrowers must occupy the property.
• Properties located in areas now deemed ineligible remain eligible for refinance.
• Existing leveraged loans or subordinate liens must be paid in full or be subordinated.
REFINANCE OPTIONS FOR SECTION 502 DIRECT AND
GUARANTEED LOANS
REQUIREMENT
NON-
STREAMLINED
STREAMLINED
STREAMLINED-
ASSIST
New Appraisal
Yes
Only for Direct 502 with
recapture subsidy due
Only for Direct 502 with
recapture subsidy due
Maximum Loan Amount
Up to the new appraised
value plus the amount of
the financed up-front
guarantee fee and
include:
• Principal & interest
balance
• Eligible closing
costs
• Subsidy recapture
May include:
• Principal & interest
balance
• Eligible closing costs
• Up-front guarantee
fee
May include:
• Principal & interest
balance
• Eligible closing
costs
• Up-front guarantee
fee
Net Tangible Benefit
No
No
Yes
$50 or greater reduction
of the total principal,
interest and monthly
annual fee payment
Include Subsidy Recapture
Yes
Up to the new appraised
value
No
No
Add/Remove Borrowers
(one original borrower
must remain)
Yes
Yes
• Add borrowers
• Remove only
deceased borrowers
Credit
• No defaults in
previous 180 days
prior to Agency
request
• Meet Chapter 10
requirements
• No defaults in
previous 180 days
prior to Agency
request
• Meet Chapter 10
requirements
• No defaults in
previous 12 months
prior to Agency
request
Ratio waivers
GUS Refers only
Must meet Chapter 11
requirements
GUS Refers only
Must meet Chapter 11
requirements
No ratio calculations
required
Utilize GUS
Yes
Yes
No
Soft seconds and/or
subsidy recapture may be
subordinated
Yes
Yes
Yes
HB-1-3555
Attachment 6-A
Page 2 of 2
Guidance for Refinancing Section 502 Direct Loans
The Section 502 Direct Loan Program provides loans to low and very-low income borrowers
that may include payment assistance, or payment subsidy that reduces the mortgage payments
determined by the borrower’s adjusted household income.
Subsidy Recapture
Arrangements must be made to either pay off or defer repayment of any subsidy recapture
due when a Section 502 loan is refinanced. Any recapture amount owed as part of the 502 direct
loan pay off may be included into the amount being financed with the SFHGLP non-streamline
refinance loan subject to the maximum loan amount. A discount on recapture may be offered if
the customer does not defer recapture (pays amount due in full) or includes the recapture amount
due into a non-streamlined refinance loan. Alternatively, any 502 direct recapture amount that is
owed at the time of refinance may be deferred if the recapture amount takes a subordinate lien
position to the new SFHGLP loan.
Obtaining a “Statement of Loan Balance” Letter for Direct Loan Borrowers
Lenders may determine an applicant has a direct loan when the credit report reflects “USDA”
or “Farmers Home Administration” as the mortgage creditor or the applicant informs the lender
they applied and received their mortgage loan through a USDA Service Center. Direct loans are
serviced by the Servicing and Asset Management Office (Servicing Office). Obtaining a
“Statement of Loan Balances” letter will assist lenders to determine if subsidy recapture is due.
The “Statement of Loan Balances” will also include instructions for the lender to follow
regardless of information submitted at the time of payoff request.
To obtain a “Statement of Loan Balance”, submit a request on lender letterhead which
includes the borrower’s name, account number and address along with a signed authorization
from the customer to release the information. The “Statement of Loan Balance” will reflect the
maximum amount of subsidy recapture that may be due. It is not a payoff statement. Requests
can be faxed to 314-457-4433.
The Servicing Office will not provide payoff quotes verbally or over the phone. The
Servicing Office also assists lenders with subordination agreements when direct loan borrowers
elect to subordinate the subsidy recapture due. Lenders and direct loan borrowers that have
questions regarding a direct loan account may contact the Servicing Office at (800) 414-1226.
