RD 3550-23 Applicant Orientation Guide

UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL DEVELOPMENT
Form RD 3550-23
(Rev. 11-06)

Form Approved
OMB No. 0575-0172

APPLICANT ORIENTATION GUIDE
This orientation guide summarizes the information applicants need to know about the Agency’s
program once a loan has been approved. No loan can be closed until the Agency staff has reviewed
this information with the applicants, and all applicants have completed Part II, Certifications. If
an applicant wants more information about any topic summarized here, the Agency staff can supply
additional detail based on the guidance provided in HB-1-3550.

PART I. PROGRAM INFORMATION
A. RIGHTS
1. Equal Opportunity. USDA regulations prohibit discrimination in USDA programs
because of your race, color, religion, sex, age, national origin, marital status, sexual
orientation, disability; because all or part of your income is derived from any public
assistance program; or because you have filed a program complaint, participated in any
program complaint proceeding, or opposed a prohibited practice.
2. Appeal. Applicants have the right to appeal program administrative actions by which
they are adversely affected, such as having assistance reduced, canceled, or not renewed.
B. CLOSING
1. Down Payment. Applicants who have non-retirement assets above $7,500 (or above
$10,000 for elderly families) or retirement assets in excess of the applicable adjusted area
median income limit are required to use them toward the purchase. All non-program
borrowers are required to make a down payment at loan closing with the exception of
non-profit and public agencies.
2. Title Insurance. The applicant generally must secure title insurance, although in rare
cases, a title opinion from an attorney may be used. In both, the title company or attorney
must be acceptable to the Agency. Title Insurance is not required when the total indebtedness
is less than $7,500.
3. Closing Agent/Attorney. The applicant must choose a closing agent who is
acceptable to the Agency. A closing agent/attorney is required for loans of $7,500 or greater.
4. Closing Costs. The applicant, seller, or both are responsible for paying closing costs at
loan closing. Typical costs include: curing title problems, title abstracts, documentary
stamps, tax monitoring services, lender’s policies of title insurance, owner’s policies of
According to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information
collection is 0575-0172. The time required to complete this information collection is estimated to average 30 minutes per response,
including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information.

1

title insurance, appraisal fees, notary fees, recordation costs, land surveys, attorney’s
fees, and application packaging fees. The applicant also must make an initial deposit
to the escrow account. Program borrowers may finance these costs.
5. Document Errors and Omissions. The Borrower(s) agree(s) to execute, acknowledge, initial,
and deliver requested Documents to Lender or Closing Agent within 10 days of receipt or pay all
costs which Lender sustains, including reasonable attorney fees.
6. Inspections. Applicants are responsible for property inspections needed to protect
their own interests. Agency inspections create or imply no duty or obligation to the
applicant. They are conducted to determine whether the property provides adequate
security, and whether it appears to meet the program’s site and dwelling requirements.
C. ON-GOING OBLIGATIONS
1. Working with CSC. Once a loan is closed, the Centralized Servicing Center (CSC)
is the primary contact for the borrower. Borrowers should direct all post-closing contacts
to CSC.
2. Payments. Regular payments must be made on or before the due date and will not be applied
until the scheduled payment is made. Failure to make timely payments can result
in late charges, reporting to credit repositories, offsets of income, and/or foreclosure. If
for any reason a payment cannot be made on time, the borrower should immediately
contact CSC. Notification will not, however, prevent the borrower from being assessed a
late fee. If a borrower wishes to make a final payment, the borrower should contact CSC
to obtain a payoff statement.
Notice to Customers Making Payment by Check: If you send us a check, it will be converted into
an electronic funds transfer (EFT). This means we will copy your check and use the account
information on it to electronically debit your account for the amount of the check. The debit from
your account will usually occur within 24 hours, and will be shown on your regular account
statement.
You will not receive your original check back. We will destroy your original check, but we will
keep an image of it. If the EFT cannot be processed for technical reasons, you authoirze us to
process a paper copy of the image in place of your original check. If the EFT cannot be completed
because of insufficient funds, we may try to make the transfer up to two additional times [and we
will charge you a one-time fee of $15.00, which we will also collect by EFT].
3. Pre-authorized Debit. A borrower may choose to have pre-authorized debits taken
from their checking or savings account each month rather than sending payments to CSC. After a
borrower’s account has been debited, the borrower receives a statement
indicating the amount of the debit.
4. Late Payments. Borrowers who fail to make timely payments will be charged a late
fee. This fee is four (4) percent of their principal and interest payment, or other amount authorized
by state law.
2

5. Non-sufficient Funds. Borrowers will be required to pay a fee for any check returned
for non-sufficient funds.
6. Escrow for Taxes and Insurance. Borrowers generally are required to establish
escrow accounts. The escrow account is maintained by CSC on behalf of the borrower
for the payment of taxes and insurance. Borrowers with escrow accounts pay an
amount each month, in addition to their principal and interest payment, that is deposited
into the escrow account for the payment of future tax and insurance bills. The Agency
will pay taxes and insurance premiums when they are due with funds from the
borrower’s escrow account.
7. Insurance. Borrowers are responsible for obtaining and continuously maintaing hazard
insurance throughout the term of the loan. If a borrower’s insurance is canceled, the Agency may
purchase insurance for the borrower and charge the borrower’s account(s) for the cost of the
insurance. Flood Insurance is also required if the property is determined to be located in
Special Flood Hazard Areas (SFHA) at the time of loan closing or subsequently
during the life of the loan. The Loan Originator will notify the borrower using
Form RD 3550-6, Notice of Special Flood Hazards, Flood Insurance
Purchase Requirements, and Availability of Federal Disaster Relief Assistance,
if the property is in a SFHA. If flood insurance cannot be secured, the property is not
eligible for Federal financial assistance.
8. Property Maintenance. Borrowers are responsible for maintaining their properties
throughout the life of the loan. The Agency may advance funds to pay for repairs that
are needed to protect the Government’s interests. Failure to protect the Agency’s
security is a non-monetary default and could result in foreclosure.
9. Energy Conservation. Energy cost savings can make a big difference in a
borrower’s ability to make regular loan payments. Utility companies and county
extension offices may be able to suggest ways to conserve energy.
D. ASSISTANCE
1. Counseling. Credit counseling is available for any borrower who desires assistance.
Borrowers may call 1-800-414-1226 to obtain counseling from a borrower
representative or, by using a touch tone phone, to access account information.
2. Delinquency Workout Agreement. If an account becomes delinquent, the borrower
may agree to pay an extra amount each month, in addition to the scheduled payment, to
bring the account current within two (2) years or the remaining term of the loan,
whichever is shorter.
3. Moratorium. Borrowers who continue to personally occupy the property may apply
for a postponement of payments for up to two (2) years if, due to a loss in income beyond
their control, they are temporarily unable to continue making scheduled payments on
their loan without unduly impairing their standard of living.
3

When the borrower is able to resume scheduled payments, the loan will be reamortized
to include the amount deferred during the moratorium. All or a part of the interest that
accrued during the moratorium may be forgiven if the borrower does not have
repayment ability.
4. Compensation for Construction Defects. For newly-built dwellings, the
Government may pay for major defects in construction that are not repaired by the
builder. Defects are usually the result of poor workmanship that the contractor refuses
to repair, or for which the repairs are inadequate. If the contractor does not fulfill his/her
obligation, the Agency may seek to debar the contractor. The borrower must file a
claim with the Field Office within 18 months of the date the borrower signs the final
inspection.
5. Subsequent Loans. A subsequent loan can be made as part of the original purchase
of the property in combination with an assumption, or it can be made during the loan
term to an existing borrower to help pay for repairs or improvements to the property.
6. Actions Requiring Agency Approval. A borrower must obtain approval from the
Agency before taking actions that may affect the security value of the property. Key
actions that require approval from the Agency include: subordination of the loan,
mineral leases, partial release of security, lease of security property, and assumptions
of indebtedness.
7. Refinancing with Private Credit. Agency credit is not intended to replace
conventional credit. When the Agency believes the borrower can obtain private credit
at the prevailing rates and terms in the area, the borrower will be required to apply for,
and if approved by the lender, accept a loan sufficient to pay the balance of the Agency
debt in full, with the exception of deferred recapture.
8. Unauthorized Assistance. Unauthorized assistance includes any loan, payment
subsidy, deferred mortgage payment, or grant for which there was no authorization or
for which the recipient was not eligible. Account adjustments may be made to correct
for the receipt of unauthorized assistance and any subsidy granted improperly will be
repaid by the borrower. Borrowers who receive unauthorized assistance based on false information
provided intentionally to obtain benefits are at risk of losing their loan, debarment from participation
in Federal benefit programs, and civil and criminal
prosecution.
E. SPECIAL OBLIGATIONS
1. Payment Subsidy – (502 LOANS ONLY). Qualified applicants may be eligible to
receive a payment subsidy to reduce their monthly payments. Income of borrowers
receiving payment subsidy will be reviewed at least annually to confirm the borrower’s
eligibility and adjust the subsidy amount. Borrowers must personally occupy the
property, and must inform the Agency whenever an adult member of the household
changes or obtains employment, when there is a change in family status, or when income increases
by more than ten (10) percent.
4

2. Recapture of Subsidy – (502 LOANS ONLY). Payment subsidy and deferred
mortgage payments are subject to recapture when the borrower ceases to live in the
property or transfers title. A borrower who repays a loan has the option of deferring
payment of recapture as long as title does not transfer and the borrower continues to
occupy the property. Recapture is typically deferred when a borrower refinances an
Agency loan with private credit or pays the last loan installment.
PART II. CERTIFICATIONS
Each applicant must initial each item to certify that they have read and understood its contents,
then sign and date the final page.
_____ _____ Lead-Based Paint Hazards. I/we understand that if the house I/we choose to
purchase was constructed before 1978, there is a possibility that it may contain
lead-based paint.

_____ _____ Radon. I/we understand that radon is a naturally occurring radio-active gas that,
when it has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. I/we understand that additional
information regarding radon and radon testing may be obtained from the county or
State public health unit.
_____ _____ Environmental Requirements. I/we understand that if any measures are
identified in the Agency’s environmental impact analysis for this project for the
purpose of avoiding or reducing the adverse environmental impacts of the
project’s construction or operation, I/we are responsible for their implementation.
_____ _____ Borrower Explanatory Information. I/we certify that I/we have received the
following information:
‰

“Warning - Lead Based Paint Hazards” or “Protect Your Family
From Lead in Your Home”

‰

Settlement Cost Booklet

_____ _____ Closing Agent/Attorney Selection. I/we have been informed that I/we have a
right to select legal counsel to represent me/us in all matters of this transaction
relating to the closing of the loan, and that I/we are responsible for all legal fees.
I/we have selected:

____________________________________
Closing Agent/Attorney (Name)
___________________________________________

___________________________________________
Closing Agent/Attorney (Address)

5

I/we understand this closing agent/attorney will be required to make certain certifications to
the Agency prior to being authorized to close the loan.
_____ _____ Financing Loan Costs. I/we choose to finance the following costs.
Appraisal Fee
Tax Monitoring Fee
Initial Escrow Deposit
Total

$__________
$__________
$__________
$__________

_____ _____ Full and Accurate Information. I/we certify that the information submitted on
the application for assistance and supporting documentation is correct to the best
of my/our knowledge. I/we understand that failure to fully disclose accurate and
truthful financial information may result in the denial or termination of program
assistance now or in the future. I/we further understand that whoever knowingly
and willfully falsifies, conceals, or covers up a material fact, or makes a false,
fictitious, or fraudulent statement or entry, may be fined or imprisoned not more
than five (5) years, or both, as provided under section 1001 of Title 18, United
States Code.
_____ _____ Acknowledgment. By signing this document I/we acknowledge that this
interview was held on _________________________________________
and I/we received a copy.
(Date)

_______________________________________________
Applicant
Date
_______________________________________________
Applicant
Date
_______________________________________________
Loan Originator
Date

6