HB-1-3555

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

Revised (05-09-22) SPECIAL PN 

CHAPTER 16: CLOSING THE LOAN AND

REQUESTING THE GUARANTEE

7 CFR 3555.107

16.1 INTRODUCTION

The lender is required to comply with all conditions stated on Form RD 3555-18 or 

Form RD 3555-18E, Conditional Commitment for Single Family Housing Loan 

Guarantee, and any attachments, as applicable. The loan must close under the same 

terms as underwritten and approved for in the Conditional Commitment. 

16.2 CLOSING THE LOAN

Required Closing Timeframe: 

• 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. 

• 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. 

• 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:

• The loan must close under the same 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. 

• 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. 
HB-1-3555

Paragraph 16.2 Closing the Loan

 16-2 

• 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: 

• All individuals applying for the loan and assuming responsibility for the mortgage 

debt must sign the Uniform Residential Loan Application and any addenda. 

• 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. 

• 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: 

• Any specific or general POA must comply with state law and allow for legal 

enforcement of the mortgage note. 

• 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 

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. 

• 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 
HB-1-3555

Paragraph 16.2 Closing the Loan

(03-09-16) SPECIAL PN 16-3 

Revised (05-09-22) SPECIAL PN

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. 

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 

conditions of the Conditional Commitment and the required fees in the appropriate 

amount, Rural Development will execute and issue the Loan Note Guarantee. 

16.3 REQUESTING THE LOAN NOTE GUARANTEE

The lender must provide evidence the loan was properly closed and remit the upfront 

loan guarantee fee and the USDA technology fee within 30 days of closing the loan. 

Requests received more than 30 days after loan closing will be considered, however the 

submission must include a payment history verifying the loan is current, as well as 

certification that all required escrow accounts are current and neither the lender nor 

another interested party provided funds to bring and/or keep the mortgage current to 

obtain the Loan Note Guarantee. A Loan Note Guarantee will not be issued beyond 30 

days of the loan closing if the account is in default at the time of the Loan Note 

Guarantee request. 

Approved lenders must submit all guaranteed loan closing transactions to the Agency 

electronically via the Lender Loan Closing (LLC) system. 

Lenders are required to execute and submit a Lender Loan Closing User Agreement 

to the Agency prior to gaining access to the system. Individual user access requires a 

validated eAuthentication ID and password (formerly Level 2). User guides for gaining 

access to and using the LLC system can be found at: https://www.rd.usda.gov/page/usdalinc-training-resource-library.
HB-1-3555

Paragraph 16.3 Requesting the Loan Note Guarantee

 16-4 

Lenders must upload the following documentation in the LLC system to receive a 

Loan Note Guarantee: 

• Final Closing Disclosure. The closing date listed on the Closing Disclosure must 

be entered on the GLS “Add/Update Loan Closing” screen. The Closing 

Disclosure is not required to be signed; 

• Promissory Note; and 

• Any other necessary documentation as specified in the Conditional Commitment. 

In addition to uploading documentation, lenders are required to enter basic loan 

closing information (e.g. loan closing date, promissory note amount, etc.) into the system 

and authorize electronic payment of the upfront guarantee fee and the USDA technology 

fee through the Pay.gov interface. 

16.4 UPFRONT LOAN GUARANTEE FEE

Lenders will pay the Agency the upfront guarantee fee through the LLC system 

interface with Pay.gov. The fee may be passed onto the borrower and is an eligible loan 

purpose. If the Agency is unable to issue the Loan Note Guarantee, the fee may be 

returned to the lender. Once the Loan Note Guarantee is issued, the fee is not refundable. 

The upfront guarantee fee amount is published in Exhibit K, of RD Instruction 440.1, 

available at https://www.rd.usda.gov/resources/directives/instructions. The fee is subject 

to change to maintain a subsidy neutral program required by Public Law 111-212. 

A. Calculation of Upfront Loan Guarantee Fee

The maximum loan amount for a guaranteed loan is 100% of the appraised value plus 

the upfront guarantee fee. Eligible closing costs may also be included in the loan amount 

up to 100% of the appraised value. Additional guidance on eligible closing costs is

available in Chapter 6 of this Handbook. 

An up-front fee calculator is available for use by lenders and employees at 

https://www.rd.usda.gov/page/usda-linc-training-resource-library. Refer to Chapter 6 of 

this Handbook for assistance in determining the maximum loan amount allowed for 

refinance transactions.
HB-1-3555

Paragraph 16.4 Upfront Loan Guarantee Fee

(03-09-16) SPECIAL PN 16-5

Revised (05-09-22) SPECIAL PN

There are three options for payment of the upfront guarantee fee. The following 

examples assume a 1% upfront fee.

Pay the entire upfront guarantee fee at loan closing 

Borrowers are not required to finance the upfront guarantee fee and may elect to pay 

the entire fee at loan closing from personal funds, seller concessions, or eligible gift 

assistance at settlement.

Example: $100,000 loan x 1% = $1,000.00 upfront guarantee fee paid at loan closing.

Finance part of the upfront guarantee fee

The borrower may elect to finance a portion of the upfront guarantee fee. In these 

cases, the borrower will pay an upfront fee that corresponds to the total loan amount 

that includes a portion the upfront fee. The remaining amount of the upfront guarantee 

fee not financed, will be paid by the borrower from personal funds, seller concessions, 

or eligible gift assistance at settlement. 

Example: $500 of the 1% fee will be financed; therefore, the total loan amount will be 

$100,500 loan x 1% = $1,005.00 (guarantee fee)

In this scenario, the applicant will borrow $100,500.00 which includes $500.00 of the 

upfront guarantee fee. The borrower will pay the remaining $505.00 of the guarantee 

fee from personal funds at settlement ($1,005.00 total fee minus the $500.00 financed 

= $505.00).

Finance the entire upfront guarantee fee

The appraised value may only be exceeded by the amount of the upfront guarantee fee 

financed. Therefore, the entire upfront guarantee fee may be financed into the total loan. 

Example: The appraised value of the subject property is $100,000. The purchase price 

of the property is $98,000. The borrower has elected to finance $2,000 in eligible loan 

closing costs that does not include the upfront guarantee fee.

Begin with the base loan amount of $100,000 ($98,000 purchase price plus $2,000 

eligible closing costs). Calculate the total loan amount including the entire upfront 

guarantee fee being financed as follows: $100,000 / .99 = $101,010.10 (total loan 

amount including the upfront guarantee fee) $101,010.10 x 1% = $1,010.10 (upfront 

guarantee fee).
HB-1-3555

 16-6 

16.5 ANNUAL FEE

The servicer will electronically pay the Agency the annual fee on all purchase and 

refinance transactions, which may be passed on to the borrower. The servicer responsible 

for payment is required to enter into a User Agreement to electronically receive billing 

notifications and submit payments. The annual guarantee fee amount is published in 

Exhibit K, of RD Instruction 440.1, available at 

https://www.rd.usda.gov/resources/directives/instructions. The fee is subject to change to 

maintain a subsidy neutral program required by Public Law 111-212. 

 Information for gaining access to the Agency’s Guaranteed Annual Fee (GAF) 

system can be found at https://www.rd.usda.gov/page/usda-linc-training-resource-library. 

A. Amount of Annual Fee 

The servicer will pay an annual fee to the Agency which is calculated on the average 

scheduled unpaid principal balance of the mortgage. 

B. Calculation of Annual Fee 

The amount of the annual fee is calculated from the original amortization schedule of 

the mortgage at loan closing. The annual fee does not include delinquent payments, 

prepayments, agreements to postpone payments, or loan modifications to the original 

mortgage.

C. Due Date of Annual Fee 

The annual fee is due and payable to the Agency on the 1st day of the billing month 

with a grace period for payments credited through the 15th day of the billing month. 

Electronic payments submitted on a business day prior to 7:00 p.m. Central Time will be 

credited the next business day. Electronic payments after 7:00 p.m. Central Time, or on a 

non-business day, will credit two business days later.

D. Payment of Annual Fee 

The servicer is responsible for the payment of the annual fee to the Agency. 
HB-1-3555

Paragraph 16.5 Annual Fee

(03-09-16) SPECIAL PN 16-7

Revised (05-09-22) SPECIAL PN

E. Advance Notice, Billing, and Reconciliation of the Annual Fee 

Servicers will receive advance notice, two months prior to the current annual fee due 

date, documenting the annual fee amount due in the subsequent year to allow the servicer

to adjust a borrower’s escrow collection to accommodate the next scheduled billing 

period. Advance notices are generated on the first business day of the month.

The annual fee billing file will be available to the servicer on the anniversary closing 

month of the loan each year. Payment of any annual fee billed is due to the Agency on 

the 1st day of the month following the anniversary date of loan settlement. 

The billing file will outline the current annual fee amount due, all past due annual fee 

amounts, and all late charge amounts due for each individual loan in the servicer’s 

portfolio that are subject to an annual fee.

F. Late Charge on Unpaid Annual Fee 

Payments received by the Agency after the payment dates prescribed in this section 

and supported by §3555.107(h) of 7 CFR 3555 shall include a late charge of four percent 

of the unpaid fee amount.

In addition to the initial late charge provided, the lender may be assessed an 

additional late charge on any annual fee remaining unpaid after the last day of the month 

in which payment was due. This additional late charge will be one percent of the unpaid 

annual fee amount. Annual fee late charges cannot be passed on to the borrower.

G. Period Covered by Annual Fee 

The initial annual fee shall cover the period effective with the first day of the calendar 

month following the settlement date and ending on the last day of the settlement 

anniversary month. Subsequent annual fee payments shall cover the twelve-month period 

preceding each subsequent anniversary date.

H. Duration of Annual Fee 

The servicer shall pay the annual fee to the Agency until termination of the Loan 

Note Guarantee. Termination may be any of the following:

• When the mortgage reaches maturity;
HB-1-3555

Paragraph 16.5 Annual Fee

 16-8 

• At prepayment. The borrower paid the mortgage in full prior to the maturity date 

or by an approved short payoff; 

• Foreclosure. The property was acquired by a lender or third party at a foreclosure 

sale; or 

• Voluntary conveyance. The property was conveyed to the lender through an 

approved deed-in-lieu of foreclosure agreement. 

A termination event must be reported to the Agency within 15 days of occurrence. 

I. Pro Rata Payment of the Annual Fee 

If the Loan Note Guarantee is terminated prior to the due date of the annual fee due, 

the servicer shall pay a prorated portion of the fee. The annual fee is prorated monthly

beginning with the month proceeding the settlement date. The servicer must determine 

how many months of the scheduled annual fee period have elapsed at the time of 

termination. Regardless of what day of the month the loan is terminated, the entire 

month in which termination occurs will be included in the prorated calculation. 

If the Loan Note Guarantee is terminated after the due date of the annual fee payment, 

the servicer shall pay a prorated portion of the annual fee. The calculation will be 

prorated from the due date of the last annual fee to the date of termination.

A pro rata annual fee will also be due and payable after a foreclosure is complete. 

The lender shall pay a portion of the annual fee prorated from the due date of the last 

annual fee to the date of settlement.

J. Method of Payment of the Annual Fee 

Payment of the annual fee will be remitted electronically. Implementation and 

technical guides to explain electronic payment of the annual fee may be found on the 

USDA LINC website, located at https://usdalinc.sc.egov.usda.gov/RHShome.do. 

K. Nonpayment of the Annual Fee 

If for any reason the servicer fails to pay the scheduled annual fee payment, submitted 

loss claims may be reduced by the cumulative amount of unpaid annual fees, late fees, 

and/or additional late charges due to the Agency. 

Servicers are subject to termination of their eligibility to participate in the SFHGLP 

due to nonpayment of the annual fee in accordance with §3555.52(c)(1) of 7 CFR 3555 

and Chapter 3 of this Handbook.
HB-1-3555

(03-09-16) SPECIAL PN 16-9

Revised (05-09-22) SPECIAL PN

16.6 TECHNOLOGY FEE

Lenders will pay the Agency a technology fee, which may be passed to the borrower 

as an authorized loan purpose, when the request for loan guarantee is submitted via the 

Agency’s Guaranteed Underwriting System (GUS). The fee can be included in the loan 

amount, subject to maximum loan-to-value thresholds. The technology fee will be 

collected through the Agency’s LLC system interface with Pay.gov when the lender 

submits the loan closing package. 

A. Amount of Technology Fee

The Agency will notify all lenders via the Agency website and GovDelivery 

notifications of the required technology fee amount. The technology fee is nonrefundable 

once the loan is closed and the Loan Note Guarantee has been issued. Failure to pay the 

technology fee at the time of closing will result in denial of the Loan Note Guarantee

request.

B. CFPB Forms: Loan Estimate and Closing Disclosure

When the technology fee is passed on to the consumer, it will be disclosed on the

Loan Estimate and Closing Disclosure as "Services You Cannot Shop For/Services 

Borrowers Did Not Shop For” in accordance with 12 CFR 1026.37(f)(2) and 

1026.38(f)(2).

These items should be titled as “USDA Technology Fee” on both disclosures, when 

applicable.

16.7 AGENCY REVIEW OF CLOSING DOCUMENTS AND ISSUANCE OF THE 

GUARANTEE

The Agency will review the required loan closing documents to ensure the lender has 

completed and fulfilled all requirements specified on the Conditional Commitment.

A. Incomplete Closing Documents 

If the Agency determines that the closing documentation is incomplete or has

correctable errors, the lender should be granted up to 30 days to correct the situation. The 

lender will be notified of incomplete packages by telephone, in writing, by e-mail, or, if 

necessary, by regular mail. Agency staff should make every effort to contact the lender 

and determine the time required to provide the necessary documentation.
HB-1-3555

Paragraph 16.7 Agency Review of Closing Documents and Issuance of the Guarantee

 16-10

While the burden of submitting a complete loan closing package is on the lender, 

Agency staff should be cognizant that the lender cannot satisfy investor requirements 

without possession of the Agency’s Loan Note Guarantee. If the loan package is not 

complete within 30 days, and the account is in default, the Agency will not issue a Loan 

Note Guarantee. The Agency will return the loan closing package if corrections cannot 

be made within 30 days. 

B. Acceptable Closing Documents

Lenders: 

• Submit their upfront guarantee fee and technology fee electronically through 

the Pay.gov interface with LLC; 

• Submit all required documentation through the LLC system; and

• Retrieve and print the Loan Note Guarantee within the LLC system.

 Agency Staff:

• Will review and determine if the closing documents are acceptable and issue 

the Loan Note Guarantee within 10 business days of receipt of the closing 

package; 

• Enter loan closing information into the Guaranteed Loan System (GLS); 

• Provide Form RD 3555-17 or Form RD 3555-17E, Loan Note Guarantee and 

the Loan Amortization Schedule to the lender; and

• Retain a copy of Form RD 3555-17 or Form RD 3555-17E for the Agency’s 

imaging repository. 

NOTE: The Loan Note Guarantee does not take effect until Form RD 3555-17 or 

Form RD 3555-17E is issued. 

C. Unacceptable Closing Documents

The Agency will not issue the Loan Note Guarantee if there are errors in the closing 

documents, the loan does not meet all program requirements, does not meet all conditions 

set forth on the Conditional Commitment, or if the applicant receives cash back at closing 

in excess of the amount the borrower paid out of pocket for costs such as a deposit, 

earnest money, an appraisal, or other allowable items that may be financed with the loan 

being guaranteed.
HB-1-3555

Paragraph 16.7 Agency Review of Closing Documents and Issuance of the Guarantee

(03-09-16) SPECIAL PN 16-11

Revised (05-09-22) SPECIAL PN

Loan funds and/or seller paid concessions may not be disbursed to the applicant(s). 

Lenders can correct oversights and unauthorized use of loan funds. If the lender can 

make the necessary corrections, the Agency will ensure the loan meets regulatory 

requirements prior to issuance of the Loan Note Guarantee.

Frequently asked questions regarding corrections after the loan has closed can be 

found in Attachment 16-B.

If the Agency determines the Loan Note Guarantee cannot be issued, the Agency will 

notify the lender of the reasons and provide review and appeal rights as described in 

Appendix 3 of this Handbook. Guaranteed loan funds will not be de-obligated until all 

appeal rights have expired, even if the process continues across fiscal years. If the 

Agency is upheld on appeal, Agency staff will de-obligate the funds in GLS. If the 

Agency’s decision to deny the request is overturned, the approval official will 

immediately take the necessary steps to issue the Loan Note Guarantee. 

16.8 CLOSING DATE

The date of closing will be defined as the closing date listed on the Closing 

Disclosure and entered on the GLS “Add/Update Loan Closing” screen.

Borrowers may elect an interest credit settlement, where interest will be paid at 

closing to the previous first day of the month. The maturity date for this type of 

settlement will be slightly less than 30 years. Example: Borrower closes loan on October 

3, 2019. For most loan closing settlements, interest would be paid from the settlement 

date to the beginning of the next month, November 1, 2019. The first payment would be 

due December 1, 2019. The maturity date would be November 1, 2049. Should the

borrower elect an interest credit settlement, fewer funds are required at closing. Interest 

would be paid to the previous first day of the month, October 1, 2019. The first payment 

would begin November 1, 2019 and the maturity date would be October 1, 2049 in this 

example.

16.9 DUPLICATE LOAN NOTE GUARANTEE

Lenders can retrieve a reissued Loan Note Guarantee from the LLC system. 

Occasionally a lender may request a certified copy or a duplicate original of Form RD 

3555-17 or Form RD 3555-17E, Loan Note Guarantee. Many investors accept a certified 

copy, or scanned copy, while others require a duplicate original. A lender’s request for a 

certified copy, scanned copy, or duplicate original of Form RD 3555-17 or Form RD 

3555-17E will be honored. 
HB-1-3555

 16-12

16.10 TRANSFERRING LOANS AND/OR SERVICING RIGHTS

Lenders may transfer guaranteed loans to other USDA approved lenders by following

the requirements described in Chapter 4 of this Handbook.

16.11 ACCEPTABLE LIEN POSITION

The guaranteed loan must have first lien position at closing; however, the lender may 

permit liens junior to the guaranteed loan if: 

• The lien will not interfere with repayment of the loan and has been considered in 

the underwriting process;

• The total value of all liens on the property is less than or equal to the property’s 

market value, except when a “soft-second” for down payment and/or closing cost

assistance creates the overage; and

• The junior lien is for an authorized loan purpose. 

16.12 OWNERSHIP REQUIREMENTS

A. Lender and Agency Responsibilities

After closing, the lender must compare the deed of trust or real estate mortgage with 

the title opinion to assess lien priority, assure the collateral is accurately covered, verify 

the date and time of recording, and ensure that the loan closing instructions have been 

followed. The Agency does not set policy for survey requirements; however, it is the 

lender’s responsibility to ensure that ownership interest that protects the security property 

has been obtained after the loan is closed. If the borrower defaults on the loan, the lender

must be able to foreclose on the property to settle the debt. If the lender failed to obtain 

all required security, the originating lender may be subject to indemnification if a loss 

claim request is made to reflect the lender’s failure to meet the lien requirements. 

B. Acceptable Forms of Ownership

The two forms of ownership acceptable to the Agency are fee-simple and secure 

leasehold.

1. Fee-Simple Ownership

Acceptable fee-simple ownership is evidenced by a fully marketable title with a 

deed vesting a fee-simple interest in the property to the borrower.
HB-1-3555

Paragraph 16.12 Ownership Requirements

(03-09-16) SPECIAL PN 16-13

Revised (05-09-22) SPECIAL PN

2. Secure Leasehold Interest

Although fee-simple ownership is preferable, the borrower may have a secure 

leasehold interest in the property. Leasehold interests are acceptable when all the 

following conditions are met:

• The applicant must be unable to obtain fee-simple title to the property;

• The rent charged for the lease must not exceed the rate paid for comparable 

leases; and

• The appraisal documents these conditions.

The lessor must own the fee-simple title. This provision does not apply to a lessor 

who is a Native American possessing a leasehold interest on restricted land. Trust or 

restricted land must remain in trust or restricted status. In these cases, the mortgage, 

deed of trust, leasehold interest, or other security interest must be approved by the 

Secretary of the Interior. For those loans to Native Americans on restricted or trust 

land, the lender must obtain: 

• Evidence that the tribe has enacted legally binding and effective foreclosure 

procedures and will enforce those procedures upon notice of default from a 

lender.

• Evidence that the tribe has enacted legally binding and effective eviction 

procedures and will enforce those procedures upon notice of default from a 

lender.

• Evidence that the tribe has adopted procedures ensuring that the guaranteed 

loan will always have first lien priority (if applicable) and will be satisfied 

before all other property debts (excepting tribal taxes) OR has adopted 

legislation requiring the tribe to follow state or local priority of lien 

procedures.

• A copy of the tribe’s lease for use on residential land.

• The lender will adhere to the tribe’s mortgage, foreclosure and eviction 

ordinances and the terms of the lease and the lender can only sell the leasehold 
HB-1-3555

Paragraph 16.12 Ownership Requirements

 16-14

interest to the tribe, the tribally designated housing entity, or another tribal 

member. The lender and RD staff should consult with the tribe to ensure they 

adhere to the tribe’s ordinances, the terms of the lease, and may exercise 

flexibility as directed by the tribe. The Agency’s Native American 

Coordinators should also be contacted for additional assistance.

For all other leasehold interest:

• Leasehold estates are an accepted practice and readily marketable in the area 

where the subject property is located.

• Neither the leasehold nor the fee-simple title may be subject to a prior lien 

unless the Agency authorizes acceptance of the prior lien before loan 

approval.

• The lease must be in writing, recorded, and contain all the following 

provisions:

o The lessor’s consent to allow the lender’s mortgage.

o The right of the lender to foreclose and sell the property without 

restrictions that adversely affect the market value of the property.

o The right of the lender to bid at a foreclosure sale or to accept voluntary 

conveyance of the property in lieu of foreclosure.

o The right of the lender to occupy, sublet, or sell the property should the 

leasehold be acquired through foreclosure, voluntary conveyance, or 

abandonment. 

o The right of the borrower to transfer the leasehold and lender mortgage to 

an eligible transferee who will assume the lender’s debt if the borrower 

defaults or is unable to continue with the lease.

o A negotiated agreement with the lessor before the leasehold interest is 

approved regarding the lender’s obligation to satisfy unpaid rent or other 

charges accrued before or during the time the lender has possession of or 

title to the leasehold. During negotiations, the lender should consider the 

length of time it will take to foreclose, how much the Agency would be 

responsible for, and when the lender would have to pay.

o Fair compensation to the borrower for any part of the property taken by 

condemnation.
HB-1-3555

Paragraph 16.12 Ownership Requirements

(03-09-16) SPECIAL PN 16-15

Revised (05-09-22) SPECIAL PN

o The unexpired term of the lease must be at least 150 percent of the term of 

the mortgage.

• The language regarding amendments to mortgages with leasehold interests, 

specified in Attachment 16-A of this Chapter, must be inserted in the 

mortgage.

C. Insurance Policy Requirements 

1. Hazard Insurance 

Until loans are paid in full, lenders must ensure that borrowers continuously 

maintain hazard insurance on the collateral to protect against fire and weather-related 

damage. A hazard insurance policy must be in force at the time the loan is closed. A

policy must document if the dwelling is on a leasehold to ensure state laws regarding 

insurance requirements are met. 

Lenders should adopt accepted industry standards for hazard insurance as noted 

below:

• Hazard insurance providers should have ratings in accordance with the most 

recent Government Sponsored Enterprise (GSE) requirements.

• Hazard insurance policies should conform to the GSE coverage requirements 

of “the standard extended coverage endorsement,” which states that a policy 

cannot be accepted that in whole or part excludes wind, hurricane or 

catastrophe insurance unless the coverage is provided in another policy with 

the same coverage limits as the hazard policy.

• Borrower occupied properties should have replacement cost coverage in an 

amount equal to the guaranteed value of the improvements or the unpaid 

principal balance, whichever is less. Deductible(s) should not exceed the 

greater of $1,000, one percent of the policy coverage, or the minimum 

deductible offered by the borrower’s chosen insurance carrier.

2. Flood Insurance

If a dwelling is in a Special Flood Hazard Area (SFHA) as identified by the 

FEMA, the property must be located within a National Flood Insurance Program 

(NFIP) participating community and the borrower must obtain flood insurance. The 
HB-1-3555

Paragraph 16.12 Ownership Requirements

 16-16

lender must ensure the borrower continuously maintains flood insurance for the life of 

the loan and that the policy is in force at the time of loan closing. 

Flood insurance must cover the lesser of the outstanding principal balance of the 

loan or the maximum amount of coverage allowed under NFIP. Unless a higher 

amount is allowed by state or federal law (which includes FEMA policies), the 

maximum deductible clause for a flood insurance policy should not exceed the greater 

of $1,000, one percent of the face amount of the policy, or the minimum deductible 

offered by the borrower’s chosen insured carrier. Existing dwellings are eligible for 

the SFHGLP if flood insurance is available. 
HB-1-3555

Attachment 16-A

Page 1 of 1

(03-09-16) SPECIAL PN

Revised (03-01-21) PN 548

ATTACHMENT 16-A

AMENDMENTS TO MORTGAGES WITH LEASEHOLD INTEREST

The following paragraphs must be inserted in the mortgage. The first paragraph should 

be placed directly before the legal description of the real estate.

“All borrower’s right, title, and interest in and to the leasehold estate for a term of _____ 

years beginning on _______________, 20____, created, executed and established by certain 

Lease dated _______________, 20____, by ____________________, Page ____ of ____ 

Records of said County and State, and any renewals and extensions thereof, and all borrower’s 

right, title, and interest in and to said Lease, covering the following real estate.”

“Borrower will pay, when due, all rents and all other charges required by said Lease, will 

comply with all other requirements of said Lease, and will not surrender or relinquish any of 

borrower’s right, title, or interest in or to said leasehold estate or under said Lease while this 

instrument remains in effect.”
HB-1-3555

Attachment 16-B 

Page 1 of 5 

(03-09-16) SPECIAL PN

Revised (05-09-22) SPECIAL PN 

Guaranteed Rural Housing

Loan Closing Reference Guide

Question Answer

I am trying to access the Loan 

Note Guarantee from the 

Single-Family Housing Lender 

Administration List page in the 

LLC system, but nothing is 

coming up when I search for the 

Borrower/Loan.

Verify you are using the correct Borrower ID number

(default choice), Borrower SSN, Name/State, or Lender 

Loan Number and are selecting “Loans” for the “Request 

Type”. 

Where can I find instructions 

for submitting the lender loan 

closing?

The “Lender Loan Closing (LLC) Guide” is available in the 

LINC Training and Resource Library, in the “Loan 

Closing” section. The LINC Training and Resources 

Library is located at https://www.rd.usda.gov/page/usdalinc-training-resource-library.

How do I change the LLC roles 

of my associates? How do I 

modify or delete Security 

Administrators?

The “SFHGLP System Access and Security Guide” is

available in the LINC Training and Resource Library, in the 

“Guaranteed Underwriting System” section, which includes 

step by step instructions to add, modify, or delete existing 

users. The LINC Training and Resources Library is located 

at https://www.rd.usda.gov/page/usda-linc-trainingresource-library.

It has been over 30 days since 

the loan closed, but we forgot to 

submit the loan closing 

package. Is it too late to request 

a Loan Note Guarantee? 

No. Rural Development will continue to accept complete 

loan closing submissions to assist the lender in obtaining a 

Loan Note Guarantee. Requests received more than 30 

days after loan closing must include a loan payment history 

verifying the loan is current, as well as certification that all 

required escrow accounts are current and neither the lender 

nor another interested party provided funds to bring and/or 

keep the mortgage current to obtain the Loan Note 

Guarantee. A Loan Note Guarantee will not be issued 

beyond 30 days of the loan closing if the account is in 

default at the time of the Loan Note Guarantee request.
HB-1-3555

Attachment 16-B 

Page 2 of 5 

Question Answer

I did not receive the email with 

a link to the Loan Note 

Guarantee. Can you resend it to 

me?

The Loan Note Guarantee can be accessed by the lender 

anytime once it is issued by USDA. Lenders can retrieve a 

copy from GUS by accessing the Application Documents 

Page. The Loan Note Guarantee is also available via the 

LLC System by following these steps: 

• Enter the correct Borrower ID number (default 

choice), Borrower SSN, Name/State, or Lender Loan 

Number.

• Select “Loans” for the “Request Type”.

• Select “Display Documents” from the Action dropdown menu. The status of the loan will be set to 

“closed.”

• Select the Borrower ID hyperlink.

I think I submitted the loan 

closing, but I am unsure how to 

confirm. Can you check for me?

The easiest way to check on a submitted loan closing is to 

log into GLS and check the “Add/Update Loan Closing” 

screen. Scroll towards the bottom to see if the upfront fee 

payment information is completed/accepted. For searches 

completed on the same day the lender submitted the LLC, 

the payment will reflect “pending” until the next day. The 

Loan Note Guarantee cannot be issued by USDA until the 

payment status changes to “settled”.
HB-1-3555

Attachment 16-B 

Page 3 of 5 

(03-09-16) SPECIAL PN

Revised (05-09-22) SPECIAL PN

Question Answer

I submitted the loan closing, but 

I did not receive the loan 

closing confirmation screen. 

Our company requires us to 

print this for our files. Is there 

a way to obtain this?

Lenders may obtain a copy of this confirmation by going to 

the Single Family Housing Lender Administration List page 

in the LLC system. Enter the Borrower ID and ensure the 

“Request Type” is set to “Obligations”. When the correct 

Borrower has been identified, select the “Action” as 

“Lender Loan Closing Confirmation” and click on the 

Borrower ID hyperlink. 

Unauthorized loan funds were 

released to the borrower at 

closing. How can we correct 

this?

Lenders have two possible solutions:

1. The lender may apply the amount of the unauthorized 

loan funds to the principal loan balance. 

Documentation of the amount applied must be 

submitted to USDA.

2. Loan fees paid by the applicant(s) with credit cards or 

other short-term loans may not be reimbursed at 

closing. If the lender is required to reimburse an 

applicant as the result of erroneous preparation of the 

Loan Estimate, funds may be provided directly to the 

applicant since it represents a penalty due from the 

lender.
HB-1-3555

Attachment 16-B 

Page 4 of 5 

Question Answer

The loan has closed for a higher 

loan amount and/or interest rate 

than what was authorized on the 

Conditional Commitment. The 

Loan Note Guarantee has not 

been issued, what can I do?

The lender may perform a loan modification to rectify the 

loan amount and/or interest rate to match the issued 

Conditional Commitment. If that is not an option, the lender 

must request USDA to release the GUS loan back for 

correction. Once the loan amount and/or interest rate has 

been corrected, a new underwriting submission may be 

performed and USDA will issue a new Conditional 

Commitment. Agency staff will follow the loan closing 

reversal guidance found on the SFHGLP SharePoint site

when processing these requests.

I have received the Loan Note 

Guarantee, but our quality 

control/investor/etc. will not 

accept the loan until X is 

corrected. Can you please 

release the file back to me for 

correction of GUS?

No. Once USDA has issued a Loan Note Guarantee, GUS 

will not be released. Loan Note Guarantees will not be 

revoked. Once they are issued, they remain valid per 

§3555.108(a). The lender may submit a “Self-Report” to the 

Agency for review and response. A self‐report must 

include: 

• Borrower ID/GUS Application ID and last name to 

select the correct file; 

• Description of the issue;

• Provide supporting documentation, if applicable; and 

• Lender/Servicer contact information.

Submit this information via email to 

SFHGLD.Compliance@usda.gov. Response time is 

dependent on the issue and number of submissions received

by USDA. It is the responsibility of the lender to ensure 

their investor will accept responses from USDA for investor

delivery.
HB-1-3555

Attachment 16-B 

Page 5 of 5 

(03-09-16) SPECIAL PN

Revised (05-09-22) SPECIAL PN

Question Answer

I need to have GUS released for 

correction after an automated 

loan closing has been submitted 

but prior to issuance of the 

Loan Note Guarantee.

Prior to de-obligation of funds, Agency employees must 

ensure that the fiscal year funds utilized for the loan were 

not prior year funds. If the funds are from the current year, 

Agency staff will follow the instructions on how to reverse 

an LLC transaction prior to the issuance of a Loan Note 

Guarantee found on the SFHGLP SharePoint site. 

Loans obligated with prior year funds cannot be released in 

GUS. Agency staff must follow the guidance in Chapter 14 

of this Handbook to process restoration of prior fiscal year 

funds. The Loan must be submitted manually in order to be 

re-obligated. 

The upfront loan guarantee fee was paid when the lender 

submitted their previous loan closing. When the closing is 

deleted from GLS, the fee already paid does not get 

returned to the lender. Instead, it goes into a pending state 

until USDA recloses the loan in GLS. Agency staff will not 

ask the lender to resubmit the upfront Guarantee Fee.