Updated USDA Credit Criteria

For Scores Below 620

In a recently released USDA Rural Development Administrative Notice (AN) Number 4346, Utilizing Credit Scores for Underwriting Single Family Housing Guaranteed Loans and (AN) Number 4345 Single Family Housing Guaranteed Program Applicant Traditional and Non-Traditional Credit History Verification, Rural Development has provided direction to USDA Guaranteed Rural Housing GRH) Originators regarding the use of credit risk scores as part of the underwriting decision, as well as how to address credit verification requirements for applicants with no credit risk score.

For Applicants with Credit Risk Scores between 580 and 620

The borrower must provide the originator documentation that the circumstances surroundingh the adverse information were temporary in nature, and were beyond the applicant's control, and have been removed so their reoccurrence is unlikely. A borrowers Job Stability will have more meaning to the decision process. Must show stability in Commission Income and Bonus Income if this type of income will be used to qualify.

Originator must evaluate new PITI for payment Shock. If new PITI is 100% or greater than current rent payment or borrower has no rent payment must look at how borrower is going to make new payment - has borrower been able to save money on a monthly basis?

If the borrower currently rents a 12 month VOR is required.

Applicants with Credit Risk Scores below 580 If any of the following apply borrower should be denied:

• One or more late payments in the past 12 months
• Foreclosure discharged less than 36 months ago
• Outstanding Tax Liens or delinquent government debt with no payment arrangements currently due
• Outstanding judgements within past 12 months
• Two or more rent payments 30 days late with last 3 years
• Accounts converted to collection in the last 12 months
• Outstanding collection accounts with no payment arrangements that are currently due
• Bancruptcy discharged less than 36 months ago

Extraordinary compensating factors that are extensively documented must be present!

Applicants with No Credit Score A minimum of three (3) non-traditional credit references must be developed, one (1) which mnust be a rental or housing payment history. If no housing or rental history than four (4) non-traditional references should be developed.

Originator should opt to have a non-traditional credit reporty completed. If no past rent or housing history the borrower should document a monthly pattern of savings or debt repayment over a 12-month period of time that is comparable to the proposed housing payment.