Credit Accounts and Adverse Credit
• Authorized user accounts do not require a monthly payment be included in the debt ratio.
However, lenders may include a payment at their discretion.
Chapter 7 Bankruptcy
• A Chapter 7 bankruptcy that is discharged or dismissed more than 36 months at the time of loan
application is not considered adverse credit.
• If the bankruptcy is less than 36 months, a credit exception is required if the GUS underwriting
recommendation is a “Refer” or “Refer with Caution” or the file is a manually underwritten file.
• If the bankruptcy included a mortgage, the lender must include any debt that the applicant may still be liable for such as real estate taxes and home owners insurance.
Chapter 12 or 13 Bankruptcy
• When there is a Chapter 12 or 13 Bankruptcy plan in progress and the GUS loan receives an “Accept” recommendation, the lender must confirm all payments are included on the Assets and Liabilities application page.
• Neither a GUS downgrade nor a credit exception are required.
• If the loan receives a “Refer” or “Refer with Caution” underwriting recommendation or is a
manually underwritten loan, the lender must retain the bulleted list of items shown on this slide.
• If the plan has been completed for 12 months prior to loan application, nothing further is
required regardless of underwriting recommendation.
Charge‐Offs
• If there are charge‐offs, the lender’s underwriter must determine if the credit risk is acceptable.
• Charge‐offs are not required to be paid; however, if there is a repayment plan in place, the
payment must be included.
Collections
• The lender’s underwriter must review all collection accounts and determine if it is an acceptable
credit risk regardless of the GUS underwriting recommendation.
• If the cumulative total of all non‐medical collections exceeds $2000, the lender must:
1. Require payment in full of these accounts prior to closing
2. Use an existing repayment agreement amount OR
3. Include five percent of the outstanding balance.
• All open collections must be listed on the Asset and Liabilities GUS page and noted and marked
• A credit exception is not required for collection accounts regardless of the GUS underwriting
recommendation.
Consumer Credit Counseling Debt Management Plans
• Lenders must include the monthly payment amount in the monthly liabilities and must retain the bulleted list of items shown on this slide.
Delinquent Court Ordered Child Support
• Applicants currently delinquent on court ordered child support are ineligible unless they have an approved repayment agreement and have made 3 timely, consecutive payments.
Delinquent Federal Non‐Tax Debt
• Applicants with delinquent Federal non‐tax debt are ineligible until the debt is paid in full or a
release of liability is documented.
Federal Taxes
• Applicants currently delinquent on federal tax debt are ineligible for a guaranteed loan unless
they have a repayment plan approved by the IRS or pay the total delinquent amount in full prior to closing.
• A minimum of 3 timely, consecutive payments must have been made and the applicant
cannot prepay a lump sum at one time to equal 3 monthly payments.
• An IRS approved extension to file a tax return does not grant the applicant additional time to pay their taxes that are due.
• Applicants must pay their estimated income taxes due by the filing date or they are considered delinquent.
Deed‐in‐Lieu, Foreclosures, and Short Sales
• Lenders must ensure the Declarations in the GUS are completed accurately.
• A deed‐in‐lieu recorded, foreclosure discharged, or short sale closed 36 months prior to the date of loan application is not adverse credit.
• If the loan receives a GUS “Accept” underwriting recommendation, neither a GUS downgrade nor a credit exception is required.
• A credit exception is required if a deed‐in‐lieu, foreclosure, or short sale occurred within the
past 36 months and the GUS underwriting recommendation is a “Refer” or “Refer with
Caution”.
• A deed‐in‐lieu, foreclosure, or short sale that occurred post divorce or legal separation and the home was awarded to the other party will not count adversely against the applicant if
documentation evidences the debt was current at the time the home was awarded to the other
Previous USDA Loss
• A lender cannot waive adverse credit for an applicant whose previous Rural Development Direct or Guaranteed home loan resulted in a loss to the agency. Only a Rural Development official may grant this exception.
• Rural Development will perform its review after the lender’s underwriter has approved the loan and has processed the final GUS submission.
• The applicant and lender must provide a letter of explanation and supporting documentation as required
Rent/Mortgage Payment History
• An applicant’s current rent or mortgage payment history is a good indicator of the probability of their future mortgage payments.
• A GUS “Accept” file does not require a verification of rent or mortgage.
• A GUS “Refer”, “Refer with Caution”, or manually underwritten loan may require a verification of rent or mortgage. The lender will refer to their GUS Underwriting Findings Report to determine if it is required.
• If a full 12 month verification is not available, the lender may utilize the time period that is
available.
• One rent or mortgage payment that was 30 or more days late in the past 12 months is significant derogatory credit and will require a credit exception from the lender’s underwriter.
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