USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.5 — Maintain Fidelity Bonding
USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.5 — Maintain Fidelity Bonding.
Verbatim regulatory text
Verbatim provisions from USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.5 — Maintain Fidelity Bonding — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶4.5 — Maintain Fidelity Bonding
4.5 MAINTAIN FIDELITY BONDING The lender must maintain fidelity insurance covering its employees’ errors and omissions at a level of coverage deemed prudent based on the size of the lender’s operation. The fidelity bond or errors and omission insurance that is generally acceptable to the secondary market agencies (Ginnie Mae, Fannie Mae, and Freddie Mac) will meet Rural Development requirements. 4.6 SELL LOANS ONLY TO APPROVED LENDERS [7 CFR 3555.54] A. Procedure A SFHGLP loan may be sold only to an Agency-approved lender, Fannie Mae, or Freddie Mac. The selling lender must report any guaranteed loan sale to the Agency by using Form RD 3555-11, Lender Record Change. The notification of transfer of the loan(s) should be emailed to the Rural Development Servicing Office at RD.SO.HSB@usda.gov. If the loan is sold to a party not approved to participate in the SFHGLP, the Loan Note Guarantee will be considered invalid. Should a lender be unable to complete the sale of a loan due to the loss of the original Loan Note Guarantee, the lender may request a copy from the Agency. The Agency will provide a copy marked “Reissued Loan Note Guarantee.” If the loan was closed in the Agency’s Lender Loan Closing System, the lender can access a duplicate copy within the system. B. Purchaser Risks And Responsibilities The purchaser of a SFHGLP loan acquires all the rights of a loan holder under the guarantee. This means that, should there ever be a loss, the purchaser is entitled to file a loss claim with the Agency. However, the purchaser must ensure that it properly fulfills all servicing obligations and must provide the Agency any requested assistance for its program monitoring. Negligent servicing actions from the lender may invalidate the Loan Note Guarantee. Negligent servicing is defined as servicing that is inconsistent with §3555.252 and includes the failure to perform those services which a reasonably prudent lender would perform in servicing its own loan portfolio of loans that are not guaranteed. Examples include, but are not limited to, violation of usury laws, civil rights laws, servicing requirements, failure to obtain the required security, and use of loan funds for unauthorized purposes. The Agency maintains the authority to enforce this policy regardless of the timeframe in which Rural Development is made aware of such HB-1-3555 (03-09-16) SPECIAL PN 4-4 Revised (08-05-25) PN 649 Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts action. Negligent servicing includes not only the concept of a failure to act, but also not acting in a timely manner or acting contrary to the way a reasonably prudent lender would act up to the time of loan maturity or until a final loss is paid.