HB-1-3555

(03-09-16) SPECIAL PN 1-1

Revised (06-24-22) PN 563

CHAPTER 1: GENERAL PROGRAM

REQUIREMENTS

1.1 WELCOME TO THE HANDBOOK

This Handbook provides Agency staff and lenders participating in the Single Family 

Housing Guaranteed Loan Program (SFHGLP) with the tools needed to originate, 

underwrite, and service guaranteed loans efficiently and effectively. Its goal is to help 

Agency staff and lenders administer the SFHGLP smoothly, while ensuring that the 

program’s basic legal and administrative requirements are met. The Handbook describes:

• Loan origination, underwriting, servicing, and liquidation policies and 

procedures;

• The role of the Agency and participating lenders in program administration; and

• Practices that will help ensure efficient and effective program administration.

The guidance provided by this Handbook is intended to be consistent with all 

applicable laws, Executive Orders, and departmental regulations, including other Agency 

regulations. Nothing contained in this Handbook should be construed to supersede, 

rescind, or otherwise amend such laws, Executive Orders, and regulations.

SECTION 1: INTRODUCTION TO THE HANDBOOK

1.2 USING THIS HANDBOOK

The Handbook is organized to allow the reader to look up information on specific 

topics easily. There is a detailed Table of Contents that provides a guide to finding 

particular topics. In addition, several graphic tools and conventions have been used to 

make information easier to find and understand.

A. Citations

• Regulatory citations. The regulation for the SFHGLP is provided in 7 CFR Part 

3555 and the text of that regulation is provided in Appendix 1. To assist readers 

in locating the regulatory authority for procedures described here, references to 

this regulation often appear in brackets, for example: [7 CFR 3555.55]. Other 

regulations or Rural Development instructions are simply referenced.

• Cross references. Topics discussed in more than one place in the Handbook are 

cross-referenced to help the reader find other related information more easily.
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• Form references. Agency form names are shown in italics. A list of all forms 

referenced in this Handbook can be found in Appendix 2.

B. Attachments and Appendices

• Attachments. Attachments at the end of each chapter contain technical 

information that is specific to the topics covered in the chapter. Attachments are 

referenced in sequence using the chapter number and an attachment letter. For 

example, Attachment 4-A is the first attachment in Chapter 4.

• Appendices. Appendices include forms and other reference materials that relate 

to multiple chapters.

• Glossary and acronym lists. Key words and terms are defined in the glossary. 

A list of acronyms and their definitions is also provided. The glossary and 

acronym lists can be found after the appendices.

C. Terminology

The SFHGLP has a centralized delivery platform under the Origination and 

Processing Division (OPD). Servicing operations are located at the Servicing Office.

This Handbook uses certain standard terminology to provide consistency.

• Agency. The organizational unit within the United States Department of 

Agriculture (USDA) that is responsible for administering the SFHGLP.

• Lender. A financial institution that has been approved to participate in the 

SFHGLP. The term is used to refer to entities that underwrite and apply for loan 

guarantees, service SFHGLP loans, or purchase SFHGLP loans from other 

entities.

• Servicing Office. The servicing center in St. Louis, Missouri where specific

servicing functions, such as loss mitigation and loss claims, are processed.

• Agency staff. An Agency employee who is responsible for implementing the 

requirements of the SFHGLP on behalf of the Agency.

• Applicant. One or more individuals who have applied for a guaranteed loan.

• Borrower. One or more individuals who have received a guaranteed loan.
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Revised (06-24-22) PN 563

1.3 GETTING ADDITIONAL HELP

This Handbook has been designed to be as comprehensive as possible. Program 

requirements are outlined along with examples and case studies to assist lenders in

complying with program requirements. However, no Handbook can provide guidance 

adequate for every circumstance, therefore Agency staff is available to answer specific 

questions.

Agency staff will not make underwriting decisions for a lender; however, they will 

help the lender understand the intent of the applicable requirements and provide guidance 

about the kinds of information that the lender should obtain to document its decisionmaking processes. Additional training may also be provided by Agency staff with regard 

to particular program requirements that a lender finds difficult to fulfill properly.

The Agency is committed to providing timely responses to lender inquiries. Lenders 

should submit general inquiries to SFHGLD.PROGRAM@usda.gov.

SECTION 2: OVERVIEW OF THE SFHGLP

1.4 SFHGLP GOALS

The SFHGLP is designed to provide low- and moderate-income households the 

opportunity to own adequate, modest, decent, safe, and sanitary dwellings and related 

facilities for their own residential use in rural areas. The program offers eligible 

applicants the opportunity to acquire, build, rehabilitate, improve, or relocate a dwelling 

in rural areas. The program provides loan guarantees to approved lenders for loans made 

to eligible applicants. 

In providing this service, the Agency strives to meet several goals.

• Customer Service. The Agency is committed to providing customer-focused, 

streamlined service.

• Partnerships. The Agency is committed to working with participating lenders in 

order to expand housing opportunities in rural areas.

• Effective Use of Resources. The Agency is committed to using tax dollars 

efficiently. 
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1.5 SFHGLP SUMMARY

Private lenders are key to the success of the SFHGLP. Although the Agency issues 

loan guarantees, lenders that have been approved to participate in the program are 

responsible for originating, underwriting, servicing, and liquidating loans. The lender is 

ultimately responsible for ensuring that all program requirements are met, and that the 

underwriting procedures for the loan are followed. The Agency reviews each loan

proposal to ensure the applicant and property appear to meet program eligibility 

requirements and monitors lender performance on an ongoing basis to help ensure that 

lenders accurately understand the Agency’s expectations.

Applicant eligibility is discussed in detail in chapters 8 through 11. In summary, 

applicants may be eligible to receive a guaranteed loan if they:

• Are income-eligible;

• Agree to personally occupy the dwelling as their primary residence;

• Have acceptable citizenship or immigration status, as defined in Chapter 8;

• Have the legal capacity to incur the loan obligation;

• Have not been suspended or debarred from participation in Federal programs;

• Have demonstrated both the willingness and the ability to repay the loan; and 

• Are purchasing a property that meets all program criteria.

In the event that a lender incurs a loss on a guaranteed loan, the Agency will

compensate the lender under the terms of the Loan Note Guarantee and all program 

requirements.

SECTION 3: GENERAL PROGRAM REQUIREMENTS

1.6 CIVIL RIGHTS

The Agency, participating lenders, and agents of participating lenders, including 

appraisers, must administer the SFHGLP fairly and in accordance with all equal 

opportunity and fair housing legislation and applicable Executive Orders. Below is a list 

of the pertinent Federal laws and Executive Orders, as well as a brief description and

highlights. While lenders will be familiar with many of these requirements, they should 

carefully review applicable legislation and orders, especially if new to Federallyconducted programs. Agency staff should refer to RD Instruction 1901-E for guidance 

on relevant civil rights requirements.
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Revised (06-24-22) PN 563

A. Major Civil Rights Laws Affecting the SFHGLP

• The Equal Credit Opportunity Act (ECOA) prohibits discrimination in the 

extension of credit on the basis of race, color, religion, national origin, sex, 

marital status, age, income from public assistance, or because an applicant has in 

good faith exercised any right under the Consumer Protection Act. An applicant 

or borrower who believes he or she has been discriminated by Rural Development 

for any of these reasons may write to the Secretary of Agriculture, Washington, 

D.C. 20250. 

• Title VIII of the Civil Rights Act of 1968 (also known as the Fair Housing Act 

of 1988, as amended) is enforced by the U.S. Department of Housing and Urban 

Development. The Fair Housing Act prohibits discrimination in the sale, rental or 

financing of housing on the basis of race, color, religion, sex, national origin, 

familial status, or disability.

• Section 504 of the Rehabilitation Act of 1973 prohibits discrimination by the 

Federal government on the basis of disability. An applicant or borrower who 

believes he or she has been discriminated by Rural Development on the basis of 

disability may write to the Secretary of Agriculture, Washington, D.C. 20250. 

• Executive Order 11063 as Amended by 12259 prohibits discrimination in 

housing or residential property financing for any Federally assisted activity 

against individuals on the basis of race, color, religion, sex, or national origin.

B. Nondiscrimination Practices

The applicable civil rights laws prohibit the denial of loans, services, and benefits 

provided under the SFHGLP to any person based upon race, color, national origin, sex, 

religion, marital status, familial status, age, disability, source of income, or because the 

applicant has, in good faith, exercised any right under the Consumer Credit Protection 

Act (15 U.S.C. 1601). This applies to the Agency, participating lenders, and agents of 

participating lenders, including appraisers. Discrimination in employment practices is 

also prohibited.

The Agency is responsible for providing guidance and oversight to participating 

lenders and their agents, including appraisers, to ensure procedures are consistently met. 

Important key areas are listed below.

• Outreach. Information about the availability of the program and how to apply 

must be broadly disseminated, and the extent of the information, assistance, and 

courtesy extended to those who make inquiries must be consistent.
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• Application procedures. Application procedures must be fair and accessible to 

all potential applicants.

• Determining eligibility. Equal rigor must be used for all applicants when 

verifying income, conducting credit checks, and allowing applicants to clarify

information.

• Making exceptions. Standards for offering exceptions must be applied 

consistently.

• Loan terms and subsidies. Opportunities for any subsidies and favorable loan 

terms must be made available consistently.

• Servicing. Loan servicing, including offering benefits and assistance, must be 

offered in a fair and consistent manner to all borrowers.

• Liquidation and property disposition. Liquidation and any subsequent property 

disposition must be executed in a fair and consistent manner. Property disposition 

practices, like those outlined for outreach, must ensure that no person has an 

unfair advantage in acquiring foreclosed property. 

C. Reasonable Accommodations for Persons with Disabilities

Participating lenders and their agents must make reasonable accommodations to 

permit persons with disabilities to apply for and benefit from Agency programs. 

Reasonable accommodations may include providing facilities that are physically 

accessible and effective communication and outreach tools so that all applicants can get 

good program information, for example, a Telecommunications Device for the Deaf 

(TDD).

1.7 REVIEWS AND APPEALS 

Agency decisions that are not made in favor of a lender or other program participant 

(applicant or borrower) are known as adverse decisions and may be reviewed or 

appealed. Adverse decisions must be based upon 7 CFR Part 3555 found in Appendix 1

of this Handbook. 

Adverse decisions include the administrative actions taken by Agency staff; and the 

Agency’s failure to take required actions within time frames specified in statutes or 

regulations, or within a reasonable time if no deadline is specified. Adverse decisions 

made by a lender are not an Agency decision. Adverse decisions made by the Agency 

may be appealed to USDA, National Appeals Division (NAD) in accordance with 

Appendix 3 of this Handbook. 
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Revised (06-24-22) PN 563

1.8 STATE AND LOCAL LAW 

State and local laws and regulations, and the laws of American Indian tribes, may 

affect implementation of the program. In such cases, supplemental guidance to resolve 

any conflicts or differences may be issued.

1.9 EXCEPTION AUTHORITY 

Exceptions to any requirement of this Handbook, or 7 CFR Part 3555, can be 

approved in individual cases by the Administrator, or designee, if application of the 

requirement or failure to take action would either adversely affect the Government’s 

interest or conflict with the objectives and spirit of the authorizing statute. Any exception 

must be consistent with the authorizing statute and other applicable laws. 

A. Who Can File a Request

Only Agency staff may file a request for an exception. However, lenders can request 

that the Agency consider submission of a formal request for exception. When asking the 

Agency to consider requesting an exception, the lender should include documentation 

that demonstrates how the exception would protect the Government’s interest or maintain 

consistency with the program’s authorizing statute.

B. What Must Be Included in the Request 

The exception request developed by the Agency for the Administrator, or designee, 

must provide clear and convincing evidence of the need for the exception. At a 

minimum, the request must include:

• A full explanation of the unique circumstances, including an explanation of any

adverse effect on the Government’s interest if the waiver is not granted;

• A discussion of proposed alternatives considered; and

• A discussion of how the adverse effect will be eliminated or minimized if the 

exception is granted.

C. Where Requests are Submitted

Requests for exceptions are submitted to the Administrator, through the Deputy 

Administrator, Single Family Housing. Requests may be initiated by:

• The Executive Director, Single Family Housing Guaranteed Loan Program; or

• The Deputy Administrator, Single Family Housing.
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Requests for exceptions regarding architectural and engineering, environmental, or 

civil rights issues will be referred for review and comment to the appropriate technical 

staff prior to making an exception request of the Administrator.

1.10 CONFLICT OF INTEREST

All Agency staff must strive to maintain the highest levels of honesty, integrity, and 

impartiality in conducting activities on behalf of the Agency. In order to avoid conflicts 

of interest, applicants and borrowers must disclose to the lender any prohibited 

relationship or association with any Rural Development employee and the lender must 

report this information to the Agency. Lenders must also disclose to the Agency any 

prohibited relationship or association that it or any of its employees has with any Rural 

Development employee.

A. Prohibited Relationships

Prohibited relationships and associations include:

• Immediate family members, including parents and children, whether related by 

blood or marriage, and any household residents;

• Close relatives, including grandmother, grandfather, aunt, uncle, sister, brother, 

niece, nephew, granddaughter, grandson, or first cousin, whether related by blood 

or marriage;

• Immediate working relationships, including co-workers in the same office, 

subordinates, and immediate supervisors; and

• Close business associations with an identity of financial interest, including, but 

not limited to, business partnerships, joint ventures, or closely-held corporations.

B. Disclosure Requirements

Disclosure of prohibited relationships and associations under this section will not

result in applicant, borrower, or lender ineligibility. Disclosures may result in special 

handling or reassignment of Rural Development employee responsibilities with regard to 

the loan guarantee request in question, to ensure no prohibited relationships or 

associations exist between the Rural Development employees responsible for the loan 

guarantee transaction, and the lender(s), borrower(s), or applicant(s). 

Applicants are required to disclose any known relationship or association with a Rural 

Development employee. When a relationship or association is identified in the 

application, the lender is required to notify the Agency prior to submission of the 
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Paragraph 1.10 Conflict of Interest

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Revised (06-24-22) PN 563

application. Attachment 1-A, Notice of Relationship/Association Between SFHGLP 

Applicant and Rural Development Employee, may be used to notify the Agency. After 

review by the Agency, the lender will be notified of any special handling procedures. 

When a Rural Development employee is aware of a relationship or association with 

an applicant, the employee is required to notify the Agency in writing. Attachment 1-A

may be used to notify the Agency of the relationship or association. Special handling of 

the application will be provided to avoid a potential conflict of interest.

The Agency official, as determined by a Director of the OPD, may use Attachment 1-

B, Requirements for Handling SFHGLP Application of Employee, Relative or Associate,

to determine the processing and servicing procedures. A copy of the notice will be 

provided to the lender and Agency employee.

1.11 UNAUTHORIZED ASSISTANCE

Unauthorized assistance occurs when a borrower is not eligible for all or part of the 

financial assistance received in the form of a loan guarantee. Loans made to unqualified 

borrowers or made for an ineligible purpose are considered unauthorized assistance. The 

form of unauthorized assistance can differ based upon false information or inaccurate 

information.

Unauthorized assistance may be identified through audits, reviews by the Agency or 

its agents, or as reported by lenders. Chapter 16, Attachment 16-B provides guidance for 

submitting lender self-reports. The significance of the unauthorized assistance will 

determine the Agency’s response in accordance with Section 3555.257 of 7 CFR Part 

3555.

When the Agency becomes aware of unauthorized assistance due to false information

provided by the applicant, the lender may be required to accelerate the loan request. 

Failure of the lender to accelerate the loan may result in reduction of a loss claim and/or 

voiding the guarantee. Based upon the severity, the Agency may pursue criminal and 

civil false claim actions, suspension and/or debarment, or other appropriate actions.

The Agency will document the findings surrounding the unauthorized assistance in 

detail and provide a solution on disposition of the case.

1.12 AGENCY LOAN APPROVAL AUTHORITY GUIDELINES FOR THE SFHGLP

All new loan specialists working in the SFHGLP are expected to receive loan 

approval authority prior to officially issuing decisions on program applications. The 

process consists of initial training, proficiency-based tests, mentoring support, file 

reviews, and a formal recommendation by the new specialist’s supervisor. The 
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guidelines detail the expectations to be followed by Agency employees delivering the

SFHGLP.

A. Training

• New specialists will complete all approved Single Family Housing (SFH) 

University guaranteed training modules in the order required by the SFH 

University curriculum. 

• The SFH University curriculum will be supplemented with on-the-job training, 

provided by an experienced loan specialist/mentor.

B. Proficiency Testing 

• The proficiency-based tests are a key component of the loan approval authority 

process. All new specialists are required to pass the test after each training 

module is completed. This will indicate to the supervisor and mentor that the new 

specialist has an acceptable level of knowledge in that program area and can 

proceed to the next training module. The proficiency-based tests and scoring 

system are administered in accordance with the SFH University curriculum 

requirements.

• After the final module is completed, the supervisor shall schedule a time for the 

specialist to take the final exam, which consists of questions generated from 

information presented in all the completed modules and will be used to assess the 

overall level of knowledge of the specialist. 

• The minimum passing score for the proficiency test is 70. If a new specialist fails

the first attempt, the first line supervisor will review the results of the test with the 

specialist, address weaknesses, advise the new specialist on the area(s) they need 

to focus, provide a solution to rectify the deficiencies, and allow the specialist to 

retake the test when the supervisor determines the specialist’s readiness. 

C. Mentoring

• At the time of enrollment in SFH University, the supervisor will assign a mentor 

to assist the new specialist in learning the requirements associated with the 

underwriting and review of SFHGLP applications.

• The assigned mentor shall prepare written quarterly reports to the new specialist’s 

supervisor, outlining the progress and recommendations on areas needed for 

continued development.
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Paragraph 1.12 Agency Loan Approval Authority Guidelines for the SFHGLP

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Revised (06-24-22) PN 563

• Mentoring is expected to last at least 12 months, but may be extended (in sixmonth increments) in the event the progress the specialist is making is not up to

par with his/her SFH University curriculum and the proficiency-based tests.

• The assigned mentor shall not be the new specialist’s supervisor. The mentor’s 

role is to help facilitate continued learning and to serve as a resource for technical 

questions and procedural guidance.

D. File Review

• After a new specialist attains a passing score on the final test, the supervisor or 

mentor will assign SFHGLP files to the new specialist to review independently. 

Prior to obligation, the supervisor or mentor will complete a file review of each 

application to evaluate and attest that the new specialist is working at a standard 

worthy of independent loan approval authority.

• Once an acceptable level of review has been attained, the first line supervisor will 

submit a minimum of four (4) GUS ACCEPT and six (6) GUS REFER or REFER 

WITH CAUTION loan files for review by a Director of the OPD, or assignee, in 

order to determine the loan approval authority recommendation. 

E. Supervisor Recommendation for Approval

• Upon successful completion of the SFH University curriculum, proficiency tests, 

final exam, mentoring period, and file reviews, a letter will be prepared by the 

new specialist’s supervisor to a Director of the OPD recommending the 

delegation of loan approval authority.

• A Director of the OPD, or assignee, will review the recommendation and any 

supporting documentation to grant or deny the delegation of loan approval 

authority to the new specialist. The designation will be documented in writing. If 

approval is granted, a certificate will be awarded to the specialist noting his/her 

approval status with USDA Rural Development. Attachment 1-C, Delegation of 

Loan Approval Authority, may be used. 

• The expected amount of time to complete this process may vary between 12 and 

18 months. If more than 24 months have elapsed, a Director of the OPD, or 

assignee, will examine the reason(s) for the delay and will develop a plan of 

action. 

• In the event the supervisor is unable to recommend loan approval authority within 

24 months due to recurring deficiencies in the specialist’s file reviews, a revised
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Paragraph 1.12 Agency Loan Approval Authority Guidelines for the SFHGLP

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training plan will be developed by the supervisor to assist the new specialist in 

overcoming and resolving the identified deficiencies.

F. Continued Training Process

Supervisors should continue to evaluate the quality of loan reviews by new 

specialists after loan approval authority has been granted. Close monitoring by an 

established quality assurance process is recommended to determine if specific 

training might be required based on unusual application submissions.

G. Reinstatement of Approval Authority

If a specialist’s loan approval authority is revoked, RD Instruction 1901-A

authorizes the Administrator to provide written restrictions or revocations of the 

authority given to any loan approval official. The Administrator may take action 

upon the recommendation of a Director of the OPD, or assignee. Supervisors are

granted the authority to determine what actions, training, and conditions are required 

to reinstate loan approval authority to a specialist.
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Attachment 1-A

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Revised (06-24-22) PN 563

ATTACHMENT 1-A

NOTICE OF RELATIONSHIP/ASSOCIATION 

BETWEEN SFHGLP APPLICANT AND RURAL DEVELOPMENT EMPLOYEE

 TO: Origination and Processing Division

SUBJECT: Notice of relationship or association between applicant and Rural Development 

 employee

This is to notify you that the following applicant is requesting a Single Family Housing 

Guaranteed Loan and is related or is associated with a Rural Development employee:

Applicant Name: ________________________________________________

Borrower ID Number: ____________________________________________

Property Address: _______________________________________________

 _______________________________________________

County Name: ________________________________

Status of Application: 

_____Pre-Eligibility _____Ready to submit _____In process 

Rural Development Employee Name: _________________________________

Duty Station: _____________________________________________________ 

Details of relationship/association: _______________________________________

___________________________________________________________________

___________________________________________________________________

Submitted by: _____________________________ Date: ____________

 Employee or Lender 

 Title/Organization

Email: _______________________________
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Attachment 1-B

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ATTACHMENT 1-B

REQUIREMENTS FOR HANDLING SFHGLP APPLICATION 

OF EMPLOYEE, RELATIVE OR ASSOCIATE 

 TO: (Lender Name)

SUBJECT: Requirements for handling SFHGLP applications of employee, relative or 

 associate for (Applicant Name, Borrower ID Number)

The following application processing procedures have been established by a Director of the

Origination and Processing Division: 

Review of application, 

approval and issuance of Conditional Commitment: _________________________________

Review of closing documents, 

Issuance of Loan Note Guarantee: _____________________________________

Post Closing Review: ____________________________________

Access to the applicant’s electronic case file in the Agency’s automated systems will be 

restricted to the aforementioned employees. All servicing actions will be in accordance with 7 

CFR 3555. 

[Date] ________________________________ 

 [Name]

 Director, Origination and Processing Branch

cc: [Employee first-line supervisor] 

 Employee

 eOPF
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Attachment 1-C

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ATTACHMENT 1-C

DELEGATION OF LOAN APPROVAL AUTHORITY

TO: [Name]

[Title]

USDA Rural Development

[Location]

By my authority as Director of Origination and Processing Division for USDA Rural 

Development, in accordance with Rural Development Instruction 1901-A, I hereby make a 

delegation to the aforementioned employee:

• Loan approval authority for Single Family Housing Section 502 Guaranteed Loans 

described in 7 CFR Part 3555. 

This delegation is effective immediately and will continue until the delegate leaves his/her 

position or until revocation or other change is made in writing.

[Date] __________________________

[Name]

Director, Origination and Processing Division

cc: [first-line supervisor]

eOPF