USDA Rural Development published an Unnumbered Letter (UL) dated Feb. 25, 2019 changing the way credit will be evaluated and Student Loan Income Based Payments will be handled during FY19. It also emphasizes the previous permanent authorization regarding Oral Verifications of Employment.

Credit Scores

The first authorization states that no consideration will be given to the number of opened and active trade lines on the credit report when determining the reliability of the credit score, as long as the applicant has at least two credit scores. This means that the credit score validation requirements as identified in HB-1-3550 are changed for the balance of this FY in accordance with the UL. Here is how to implement the changes:

If the applicant has at least two credit scores on the Tri-Merge Credit Report (TMCR), the applicable score is reliable regardless of how many trade lines are on the TMCR.

Then, if that reliable score is 640 or higher:

• There’s no need to verify their rental history.
• RD won’t look at alternative credit or the indicators of unacceptable credit provided that the applicant has no outstanding judgments from the U.S. in federal court and there are no significant delinquencies.

However, if that reliable score is less than 640:

• You’ll need to obtain other credit verifications as outlined in HB-1-3550, Chapter 4, Paragraph 4.12 C.
• A full credit analysis is needed.

Finally, if the score (regardless of the number) is not reliable because there are less than two scores on the TMCR:

• You’ll need to obtain other credit verifications as outlined in Paragraph 4.12 C.
• A full credit analysis is needed.

Student loans

The student loan and oral Verification of Employment authorizations pertain to Rural Development processing and waiver authority.

The State Office may grant a waiver as specified in the UL to use the applicant’s income based repayment plan. This does not mean that a waiver will automatically be granted in every case, but it does allow more flexibility to grant a waiver when warranted.  When submitting an application, it will need to be well documented to show what the income based repayment amount is, that the applicant has made payments as agreed, etc. and make the recommendation/request for the use of the income based repayment plan.

Reminder about oral verifications

While oral verifications are solely the responsibility of Rural Development staff, this requirement was revised in November of last year to further streamline processing.  The UL serves as a reminder of that change.

The UL (download here) is valid through the remainder of the Fiscal year and will expire at close of business on Sept. 30.