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

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SFH Guaranteed Origination

October 6, 2022

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

The Single Family Housing Guaranteed Loan Program (SFHGLP) is pleased to announce revisions to technical Handbook-1-3555, Chapter 11, Ratio Analysis. These changes became effective upon the recent issuance of Procedure Notice (PN) 570. Below are the highlighted revisions:

Chapter 11 - Ratio Analysis

11.2 THE RATIOS

B. The Total Debt Ratio

• Clarified that payment amounts listed on the credit report will be used in the Total Debt Ratio, unless verification is obtained which supports an alternate payment amount.
• Student Loans

Revised to indicate that for all outstanding student loans, regardless of the payment status, lenders must use:

- The payment amount reported on the credit report or the actual documented payment, when the payment is above zero; or

- One half (.50) percent of the outstanding loan balance documented on the credit report or creditor verification, when the payment amount is zero.

• Automobile Expense Allowances

Renamed section “Expense Allowances (including Automobile Allowances),” clarified the full amount of the monthly debt associated with the expense must be included in the Total Debt Ratio, and referenced Chapter 9 for guidance on calculating income for the expense allowance.

11.3 DEBT RATIO WAIVERS AND COMPENSATING FACTORS

A. Purchase Transactions: Debt Ratio Waivers

• Clarified that for GUS Refer, Refer with Caution, and manually underwritten loans without GUS assistance, supporting documentation for compensating factors is provided to the Agency and maintained in the lender’s permanent file. In addition, the sub-bullet referencing payment shock as a compensating factor was removed.

B. Refinance Transactions: Debt Ratio Waivers

• Removed the sub-bullet referencing payment shock as a compensating factor for GUS Refer, Refer with Caution, and manually underwritten loans without GUS assistance.

11.7 OBLIGATIONS NOT INCLUDED IN DEBT-TO-INCOME RATIOS

• Added “Medical Payments” to the list of obligations not included in total debt-to-income ratio calculations.

Questions regarding program policy and this announcement may be directed to the National Office Division at sfhgld.program@usda.gov or (833) 314-0168.

Thank you for supporting the Single-Family Housing Guaranteed Loan Program!