USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.9 — Indemnification

USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.9 — Indemnification

4.9 INDEMNIFICATION If the Agency determines that the originating lender did not originate a loan in accordance with the requirements of 7 CFR 3555 and this Handbook, the Loan Note Guarantee will remain in effect for any holder of the loan who acquired it from an originating lender. The Agency may use available legal remedies against the originating lender, which may include revoking the originating lender’s eligibility status in accordance with §3555.52 and Chapter 3 of this Handbook. The Agency may also require the originating lender to: 1. Indemnify the Agency for the loss if the loan default under the guarantee occurred within 60 months of loan closing when one or more of the following conditions is present: x The originating lender utilized unsupported data or omitted material information when submitting the request for a Conditional Commitment to the Agency. HB-1-3555 (03-09-16) SPECIAL PN 4-6 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 The Agency determined that the originating lender did not originate a loan in accordance with the applicable statutory requirements or the regulatory requirements of 7 CFR Part 3555. x The originating lender failed to properly verify and analyze the applicant’s income, assets, and employment history in accordance with Agency guidelines. x The originating lender failed to properly verify and analyze debt and obligations in accordance with Agency guidelines. x The originating lender failed to address appraisal discrepancies or deficiencies impacting the value of the property. x The originating lender failed to address property deficiencies identified in the appraisal or inspection report that affect the health and safety of the occupants or the structural integrity of the property. x The originating lender used an appraiser that was not properly licensed or certified to make residential real estate appraisals in accordance with §3555.107(d). 2. Indemnify the Agency for the loss regardless of how long ago the loan closed or the default occurred if the Agency determines that fraud or misrepresentation was involved in the origination of the loan. If it is determined the loan is subject to indemnification, the payout of a loss claim shall be determined based on the following scenarios: x If the originating lender sold the loan and transferred the Loan Note Guarantee to a servicing lender, the loss claim may be paid to the lender that acquired the loan and indemnification will be pursued against the originating lender. x If the originating lender assigned servicing rights to a servicing lender but continues to hold the Loan Note Guarantee, the loss claim will not be paid. x If the originating lender is also the servicing lender and no transfers have occurred, the loss claim will not be paid. HB-1-3555 (03-09-16) SPECIAL PN 4-7 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 Adverse decisions involving loss claims shall be resolved in accordance with guidance provided in Appendix 3 of this Handbook.

Source: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.9 — Indemnification · source URL · snapshot 0466acd1ea2d17a4