USDA: Expanded Guidance – USDA Modified Interest Rate Waiver
April 2, 2018
This notification provides additional guidance on the topic delivered earlier today with a subject line of “USDA Modified Interest Rate Waiver.”
In response to the rising interest rate environment, the Single Family Housing Guaranteed Loan Program (SFHGLP) is issuing a waiver for all approved loan servicers to modify loans whereby the interest rate may exceed the original guaranteed note rate. The current policy which limits the modified maximum interest rate to the original guaranteed note rate has hindered loan servicers in their ability to offer the full range of loss mitigation alternatives to borrowers.
Loan servicers must adhere to Chapter 18 of the SFHGLP Technical Handbook when conducting a financial analysis of the borrower’s capacity to support the modified mortgage payment. The result of the financial analysis must demonstrate the borrower’s ability to support the modified mortgage payment going forward.
Effective immediately, loan servicers may consider offering a modified interest rate which does not exceed the Freddie Mac Weekly Primary Mortgage Market Survey (PMMS) rate for a 30 year fixed rate mortgage (US Average) rounded to the nearest one-eighth of one percent (0.125%) plus 50 basis points as of the date the modification is approved. This may result in a modified interest rate which exceeds the original guaranteed note rate which is now permissible as a result of this waiver.
This waiver is in effect until rescinded by the SFHGLP.
Questions regarding this announcement may be directed to Richard Kane in the Rural Housing National Office at 202-720-0320 or Richard.Kane@wdc.usda.gov.
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Single Family Housing Guaranteed Loan Division
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