USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.2 — Closing The Loan

USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶16.2 — Closing The Loan

16.2 CLOSING THE LOAN Required Closing Timeframe: x Purchase and refinance transactions - the lender has 90 days from the issuance of the Conditional Commitment to close the loan, with an opportunity for one 90- day extension. The extension must be requested prior to the expiration of the Conditional Commitment. x Construction transactions - the expiration date for new construction, other than the “combination construction to permanent loan” option outlined in Chapter 12, should correspond with the estimated project completion date, but cannot exceed 12-months. x Requests for extensions must be approved by the Agency in writing. Upon approval, a new Conditional Commitment will be issued reflecting the new expiration date. The Guaranteed Loan System (GLS) application page will be updated with the commitment extension. Closing in Compliance with Conditional Commitment Approval: x The loan must close under the same, or more favorable, terms as underwritten and approved on the Conditional Commitment. Any changes in the loan terms, characteristics of the applicant, or characteristics of the property between the issuance of Conditional Commitment and loan closing requires the lender to notify the Agency in writing. HB 1-3555 (03-09-16) SPECIAL PN 16-2 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 Adverse changes may require the release of the application submitted in the Guaranteed Underwriting System (GUS) to the lender for correction and resubmission to ensure there is no impact to the underwriting recommendation. Refer to Chapter 5 for guidance on file submission. x The Agency must verify in writing, prior to loan closing, that the changes are acceptable. Failure by the lender to obtain approval from the Agency may result in denial of the request for Form RD 3555-17 or Form RD 3555-17E, Loan Note Guarantee. Signatures: x All individuals applying for the loan and assuming responsibility for the mortgage debt must sign the Uniform Residential Loan Application and any addenda. x Standard industry closing documents are utilized when closing the loan. The lender is required to ensure a valid and enforceable first lien on the property is obtained. Any individual whose signature is required by state law must sign the security instruments and/or note to create a valid first lien, to pass clear title, or to waive inchoate rights. All owners to be vested in title must sign the security instruments, except as noted in this section. x Lenders should not encourage borrowers to sign blank or incomplete documents. A Power of Attorney (POA) may be used when the mortgagee verifies and documents that the following applicable requirements have been satisfied: x Any specific or general POA must comply with state law and allow for legal enforcement of the mortgage note. x For military personnel, a POA may only be used for one of the applications (initial or final), but not both: o when the service member is on overseas duty or on an unaccompanied tour; o when the mortgagee is unable to obtain the absent borrower’s signature on the application by mail or via fax; and HB 1-3555 (03-09-16) SPECIAL PN 16-3 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 where the attorney-in-fact has specific authority to encumber the property and to obligate the borrower. Acceptable evidence includes a durable POA specifically designed to survive incapacity and avoid the need for court proceedings. x For incapacitated borrowers, a POA may only be used where: o a borrower is incapacitated and unable to sign the mortgage application; o the incapacitated individual will occupy the property to be guaranteed; and o the attorney-in-fact has specific authority to encumber the property and to obligate the borrower. Acceptable evidence includes a durable POA specifically designed to survive incapacity and avoid the need for court proceedings. Electronic signatures in accordance with the conditions outlined in Chapter 15 of this Handbook may be accepted. Title Evidence. The lender will ensure that the mortgage must have a valid first lien position at closing and is covered by either a title insurance policy issued by an acceptable insurer (including any required endorsements) or an attorney’s title opinion letter issued by an attorney experienced in the examination of titles in the jurisdiction where the subject property is located. When using attorney title opinion letters, the lender will retain the documentation the attorney used in making its determination on the title coverage in their permanent case loan file. Additional guidance for acceptable lien position requirements can be found in this Chapter. The lender should be aware of any additional investor criteria/overlays beyond the SFHGLP requirements regarding the use of attorney opinion letters. HB 1-3555 (03-09-16) SPECIAL PN 16-4 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. Below are the requirements for the use of each title evidence type: Title Insurance Attorney Title Opinion The guaranteed loan must be in first lien position when recorded. The guaranteed loan must be in first lien position when recorded. The title policy must list all other liens and state that they are subordinate to the guaranteed loan. The attorney opinion letter must list all other liens and state that they are subordinate to the guaranteed loan. The amount of title insurance coverage must at least equal the original principal amount of the loan. The attorney opinion letter must include language relating to the amount of coverage that must at least equal the original principal amount of the loan. The title policy must provide evidence of good and marketable title. If there are exceptions discovered during the title search, the lender is responsible for reviewing and determining if those title exceptions affect the property’s value or marketability. The attorney opinion letter must be prepared and signed by an attorney licensed to practice law in the jurisdiction where the subject property is located and experienced in examination of titles for all property types. If there are any exceptions discovered, the lender is responsible for reviewing and determining if those exceptions affect the property’s value and marketability. The following property types are ineligible for an attorney title opinion letter: x Manufactured Homes x Leasehold Estates (Native American restricted land and Community Land Trust) Interest Credit Closing. To reduce the burden on borrowers whose loans were scheduled to close at the end of the month, but did not due to unforeseen circumstances, lenders and borrowers may agree to credit the per diem interest to the borrower and have the mortgage payments begin the first of the succeeding month. Lender Certification. The lender will certify that the loan has been underwritten and closed in accordance with 7 CFR 3555.107, that it meets all conditions set forth in the Conditional Commitment, and that all documentation has been submitted to Rural Development. The lender acknowledges that upon receipt and acceptance of the HB 1-3555 (03-09-16) SPECIAL PN 16-5 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. conditions of the Conditional Commitment and the required fees in the appropriate amount, Rural Development will execute and issue the Loan Note Guarantee.

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