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USDA Rural Development Introduces Guaranteed Underwriting System Pilot

October 2, 2006

WASHINGTON, D.C.- Lenders will soon have the ability to underwrite USDA Section 502, Single Family Housing Guaranteed loans using the new Guaranteed Underwriting System (GUS). GUS was developed by USDA Rural Development to automate a manual underwriting process, which considers loan applications for approval. A unique GUS feature is that it determines a borrower's income and a property's eligibility for the Single Family Housing Guaranteed Loan Program (SFHGLP).

"Through the use of cutting-edge technology, GUS will advance President Bush's commitment to increase minority homeownership," said Agriculture Under Secretary for Rural Development Thomas C. Dorr. "This program offers a full service automated underwriting system which will be made available in the future for private sector use." Currently eight lenders are piloting the new system. The genesis of GUS came out of a high-level discussion held three years ago between Dorr and then Federal Housing Administration Commissioner John Weicher on ways to work cooperatively, through sharing of knowledge resources, to automate USDA's manual underwriting process.

GUS will enable participating lenders to receive faster loan decisions, streamlined documentation requirements, better quality loans, more consistency in program delivery, and will fulfill legal requirements under the Government Paperwork Elimination Act and the Freedom to E-File Act. Through GUS, the Agency expects to see the majority of loans automatically underwritten, which enhances its ability to manage risk. The Agency will continue to monitor data and changes in the market with the added flexibility of adjusting underwriting standards when necessary.

USDA Rural Development began a market test of GUS on August 1, 2006, with a limited number of lenders. Participating lenders in Phase I of the market test are First National Bank of Columbus, Neb.; Allied Mortgage Capital Corporation of Rockwell, Texas; American Southwest Mortgage of Oklahoma City, Okla.; Central National Bank of Junction City, Kan.; Guaranty Trust of Murfreesboro, Tenn.; State Bank of Lincoln of Lincoln, Ill.; The Mortgage Company of Junction City, Kan. and Virginia Housing Development Authority of Richmond, Va. Additional lenders will be added to the market test later this year in preparation for full GUS implementation in January 2007.

Section 502 Guaranteed Loans are made to qualifying low- and moderate-income families to purchase modest homes in rural areas. The loans are made by mortgage lenders, such as banks, credit unions and mortgage companies. Loans can be made up to 100 percent of the appraised value of the property. Rural Development guarantees the loan made by the lender in case of default by the borrower.

USDA Rural Development's mission is to deliver programs in a way that will support increasing economic opportunity and improve the quality of life for rural residents. As a venture capital entity, Rural Development has invested more than $72 billion since the beginning of the Bush Administration to provide equity and technical assistance to finance and foster growth in homeownership, business development, and critical community and technology infrastructure. As a result, more than 1.2 million jobs have been created or saved through these investments. Further information on rural programs is available at a local USDA Rural Development office or by visiting USDA's website at www.rurdev.usda.gov.

Source: USDA Rural Development



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