RHS permanently adopted the Single-Close Construction Pilot Program (previously in effect in 27 states) on a nationwide basis, with modifications. The Single-Close Construction Program (Program) allows approved lenders to close a new construction loan and receive a loan note guarantee prior to the time construction begins.
RHS modified several requirements of the pilot Program as part of the permanent Program adoption. Per the modified provisions, RHS:
- removed the requirement to modify or re-amortize the loan once construction is complete;
- expanded the single-close process to include rehabilitation loans (when combined with the purchase of an existing dwelling);
- introduced a form titled “Sample Worksheet for Calculating Maximum Loan Amount” that may be used in connection with single-close repair and rehabilitation loans;
- defined the term “warehouse lender”; and
- updated record retention requirements to include single close construction documentation.
In addition to the above modified provisions, RHS also permits lenders who use warehouse lines of credit to charge a temporarily higher interest rate during construction to recoup financing costs, and provides lenders the option to establish a reserve account for principal, interest, taxes and insurance (PITI) payments during the construction period.
Furthermore, RHS eliminated the maximum interest rate cap for ALL Single Family Housing Guaranteed Loan Program loans, and revised the Request for Single Family Housing Loan Guarantee Form (Form RD 3555-21).
The adopted rules become effective October 1, 2019.
Click Here to View the RHS Bulletin – Single Close Construction – Interest Rate Cap Elimination
Click Here to View the RHS Bulletin – Single Close Construction – Elimination of Interest Rate Cap
