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4.2 OPERATE RESPONSIBLY
The lender must:
x Operate in a prudent and businesslike manner. A lender that maintains approval
from Fannie Mae, Freddie Mac, VA, or HUD (as outlined in Chapter 3 of this Handbook) is presumed to act responsibly if all elements of the Lender Agreement are maintained.
x Establish and maintain adequate written policies for loan origination,
underwriting, servicing, and quality control. Refer to Chapter 3 for additional guidance on quality control plans. It must be compliant for the organization on which approval is based and include a representative sampling of SFHGLP loans. The lender must provide copies of the quality control plan for Agency review.
x Avoid Conflicts of Interest. Individuals that have a direct impact on the mortgage
transaction (i.e. underwriters, appraisers, inspectors, engineers, etc.) are prohibited from having multiple roles or multiple sources of income, either directly or indirectly, in a single Rural Development transaction. Examples of indirect compensation include, but are not limited to, compensation resulting from
(03-09-16) SPECIAL PN 4-1 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
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an ownership interest in another business that is party to the same Rural Development transaction or compensation earned by a spouse, domestic partner, or other family member that has a role in the same Rural Development transaction. Individuals that do not have a direct impact on the mortgage approval decision may have multiple roles or sources of compensation from the same Rural Development transaction. Individuals with a role in the mortgage transaction who are also the applicant may not participate in any part of the loan origination, approval, or closing process on behalf of the lender. Lenders remain responsible for complying with all applicable Federal lending laws.