Kentucky USDA Rural Housing Mortgage Lender: Kentucky USDA Guideline Changes for Income, Student Loans, and total debt ratios.

Updated HB-1-3555, Chapter 11, Ratio Analysis

The Single Family Housing Guaranteed Loan Program (SFHGLP) is pleased to announce revisions to technical HB-1-3555, Chapter 11, Ratio Analysis. An advance copy of the proposed changes was made available on July 20, 2021. These changes became effective upon the recent issuance of a Procedure Notice (PN). Below are the highlighted revisions:

Chapter 11- Ratio Analysis

11.2 B. The Total Debt Ratio:

Student Loans: Removed the phrase “the greater of” from Non-Fixed payment loans and added guidance regarding “when the payment is above zero” and “when the payment is zero”.
Revolving accounts: “with no outstanding balance” are not required to be closed.
Mortgages: Rental Property - Eliminated language regarding omission of mortgage debt. Guidance for entry of rental income in GUS is provided in the GUS Lender User Guide under Section 4.1.4.1.1, Retained Investment Properties.
Added: Debt management plans:

Include the monthly payment amount due from the counseling plan.
Refer to Chapter 10 for guidance on credit exception and documentation requirements.

11.3 DEBT RATIO WAIVERS AND COMPENSATING FACTORS

A. Purchase Transactions: Debt Ratio Waivers

GUS Refer, Refer with Caution, and manually underwritten loans without GUS assistance:

Added: “The lender must document eligible compensating factors to support a debt ratio waiver.”
Added: “all” of the following conditions are met to the first paragraph.

Debt Ratio Waiver Request and Agency Approval:

Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee represents Agency approval of the ratio waiver.”

B. Refinance Transactions: Debt Ratio Waivers

Added a bullet: GUS files that receive a GUS recommendation of Refer, Refer with Caution, or are not supported by GUS, require debt ratio waivers, and supporting documentation must be submitted to the Agency.
Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee represents Agency approval of the ratio waiver”.

11.7 OBLIGATIONS NOT INCLUDED IN DEBT-TO-INCOME RATIOS