USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶3.3 — Application

USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶3.3 — Application

3.3 APPLICATION Lenders will submit Form RD 3555-16, Agreement for Participation in Single-Family Housing Guaranteed/Insured Loan Programs of the United States Government, and the necessary supporting documentation as outlined in Attachment 3-A, Lender Approval Checklist, to the Loan Servicing Branch at [email protected]. HB-1-3555 (03-09-16) SPECIAL PN 3-6 Revised (07-21-23) PN 588 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. A. Quality Control Plan Reliable and effective quality control (QC) programs are essential to a lender’s success in the mortgage industry. Quality control begins prior to application intake and continues through the mortgage process. The purpose of quality control is to monitor and evaluate the integrity of the origination and servicing processes and is customized to the lender’s organization, circumstances, and needs. The quality control plan must contain the necessary controls as required by other recognized sources noted in Section 3.2A of this chapter. At a minimum, the lender’s plan should include all of the following: x Mission Statement or stated objective. x Describe the lender’s participation with other Federal agencies, such as the Department of Treasury and any other investors or partners. Include a statement that the lender plans to operate within USDA Rural Housing Service guidelines. x Written procedures for documenting a re-verification process. This includes implementing a sampling methodology that consists of a representative sample of Rural Development loans, has a consistent and timely review process, and addresses document retention. x A post-closing review process describing how a sampling of loans are independently reviewed for adherence to lending guidelines. x A quality control team that operates independently from loan origination, underwriting, and servicing functions; or contracts out this function. If contracted out, the lender must adequately monitor the performance of the contractor. x Describe the separation of duties between the loan production staff and quality control staff. Under no circumstances should the quality control review staff be involved in the day-to day loan production. x Describe the standard operating procedures for all employees who will be involved with, or affected by, the quality control process. x Describe the timelines of internal quality control reviews, including the percentage of loans reviewed and the frequency of the quality control reviews. For example, 10% of closed loans are independently reviewed each quarter by a quality assurance specialist who was not involved in underwriting and closing those loans. x Quality control reviews should include a description of how appraisals or property evaluation reports are reviewed. HB-1-3555 (03-09-16) SPECIAL PN 3-7 Revised (07-21-23) PN 588 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 Written procedures to report violations of laws or regulations, false statements, and program abuses directly to appropriate authorities in a timely manner. Information regarding violations must be reported to the Loan Servicing Branch at [email protected]. x Ensure adequate quality control and data integrity checks are included for loans processed through automated underwriting systems on a regular and timely basis. x Ensure adequate monitoring of all vendors, contractors, and third-party providers involved in the origination process (e.g. mortgage brokers, correspondents, appraisers, and credit agencies). x Identify training opportunities for lender staff. B. Additional Requirements for Quality Control Plans for Servicing Lenders Quality control plans for servicing lenders must contain the required information identified in Section 3.3A, as well as address the following: x How escrows are handled for taxes, hazard, and flood insurance (if applicable). x How funds are applied when payments are received for principal and interest, hazard and flood insurance, and taxes. x What happens if excess funds are collected in escrow.

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