Effective for USDA Commitments issued on/after 10/01/11: All purchase and refinance loans will be subject to an annual fee (MIP) of 0.30% of the outstanding principal balance. This will be included in the borrower’s monthly PITI and remitted to the agency by the Servicer on the anniversary of the Note Date. The originator is responsible for the initial calculation but for subsequent years, the Servicer is responsible. The upfront fee will be reduced on Purchase Transactions from the current 3.50% down to 2.0%; Refinance fees remain at 1.0%. Calculate the annual fee for the first year of the loan using the full loan amount times the 0.30% annual fee, divided by 12 months which must then be included in the qualifying PITI. Qualifying Ratios are based on the inclusion of the monthly installment of the annual MIP fee. It is important to note that this annual fee is for the full life of the loan, it will never drop off regardless of outstanding principal balance or payment history. The fee structure will be subject to all loans with USDA 1980-18 commitments issued on or after 10/01/2011. Any loan that does not have a USDA 1980-18 commitment issued on or before 09/30/2011 must be restructured under the new fee structure as required by the agency (USDA). This will require a full re-disclosure to the borrower, re-underwrite with the reduced upfront fee, inclusion of the annual MIP in the PITI and is subject to all RESPA requirements. Should a USDA committed and obligated loan require a loan amount increase on or after the fee structure changes take place, the new fee structure will be required. USDA will not grandfather in the previous fee structure to any changes required on a previously committed loan.

Here are some FAQ‘s…..
Obligation Date: If a loan request is submitted to RD on or before September 30, 2011, but cannot be obligated until October 1, 2011 or later, will the loan be subject to an annual fee?

Response: Yes. All loan requests with an obligation date of October 1, 2011 or later will be subject to an annual fee….NO EXCEPTIONS.
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Conditional Commitment Expiration: Will a loan be subject to the annual fee if the Conditional Commitment expiration date is on or after October 1, 2011?

Response: If the Conditional Commitment is dated prior to October 1, 2011, the loan will not be subject to an annual fee as the loan should already be obligated with FY 2011 funds that are not subject to an annual fee.
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Fee Disclosure: How will the annual fee be disclosed?
Response: RD will disclose the annual fee to the applicant by amending Form RD 1980-21, “Request for Single Family Housing Guarantee.” The annual fee will be disclosed to the lenders by amending Form RD 1980-18, “Conditional Commitment for Single Family Housing Guarantee” and Form RD 1980-17, “Loan Note Guarantee.” The forms will be revised with an effective date of October 1, 2011.
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Calculating the Annual Fee: How will the annual fee be calculated?

Response: Based on the total loan amount (including any up-front guarantee fee financed in the loan), the initial fee for the first year of the loan will be determined and calculated based on the scheduled average Unpaid Principal Balance (UPB) for the first year. Remaining years of the loan will also be calculated and charged on the scheduled average UPB , not the actual UPB. An Upfront and Annual Fee Calculator is available for public use to assist in calculating the upfront and annual fee. The Guaranteed Underwriting System and the internal Guaranteed Loan System will also calculate and display an annual fee loan amortization schedule once the new software is implemented in late September
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Fee Calculator: To ensure the fee is accurately calculated, is there an RD Annual Fee Calculator to assist with calculation of the fee?

Response: Yes. The annual fee calculator is now online, and located at: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do

The Federal Trade Commission (FTC) has issued a new regulation known as the “Mortgage Assistance Relief Services” Rule (the “Rule”). Mortgage relief scams are getting homeowners left and right, claiming that for a fee, negotiations will occur with their mortgage lender or service to obtain a loan modification, a short sale or other relief from foreclosure.

To prevent false claims, the Rule is a series of regulations to protect you, the consumer, from these scams.

Mortgage Assistance Relief Services (“MARS”) providers are defined to include providers of any of the following services, if service is provided in exchange for consideration:

• Stopping, preventing or postponing foreclosure;
• Negotiating a loan modification, foreclosure or extension; and or
• negating a short sale or deed in lieu arrangement

Also, the Rule covers sale-leaseback transactions marketed as a way to save a consumer’s home from foreclosure. MARS providers are required to make certain disclosures and are prohibited from collecting any fees in advance. The Rule prohibits MARS providers from making misleading claims about services they provide. They are also prohibited from advising consumers to not communicate with their own lender.

Below are a few disclosures to the Rule that mortgage relief companies within their advertising and communications at individual consumers must disclose:

• they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;
• the lender may not agree to change the consumer’s loan; and
• if companies tell consumers to stop paying their mortgage, they must also tell them they could lose their home and damage their credit rating.

It must also be explained to the consumer that they can stop doing business with the company at any tim, can accept or reject any offer the company obtains from the lender or servicer, and, if they reject the offer, they don’t have to pay the company’s fee (companies must disclose the amount of the fee).

For more information on the Mortgage Assistance Relief Services Rule, download a copy of the manuscript here.

Remember to call your John Adams Mortgage Professional to discuss mortgage programs and payments.