WASHINGTON — A series of sweeping changes to a popular loan
program for rural homebuyers were announced by Secretary of Agriculture
Secretary Tom Vilsack.
The changes are part of an extensive overhaul that will
strengthen rural housing markets, increase the availability of rural home loans
and spur the construction of new homes in rural areas.
“These improvements will help create jobs and enable more
people to participate in the rural home loan guarantee program,” Vilsack said.
“The changes will add significant capital to rural areas and give rural
Americans more opportunities to make financing decisions that lay the groundwork
for the future prosperity of their families.”
The changes take effect Sept. 1, 2014, and make several
improvements to USDA Rural Development’s Single Family Housing Guaranteed Loan
Program. Among other things, they expand the types of lenders who are eligible
With the rule change, any lending entity supervised and
regulated by the Federal Deposit Insurance Corp., the National Credit Union
Administration, the Office of the Comptroller of the Currency, the Federal
Reserve Banks or the Federal Housing Finance Board may underwrite loans
guaranteed by Rural Development.
This will enable many small community banks and credit
unions to participate in the guaranteed loan program. Currently, these entities
are not eligible lenders.
In another policy change, for the first time, borrowers will
be able to choose home loan terms shorter than 30 years. This will result in a
significant cost savings for borrowers who qualify for the higher payments and
who want to pay off their loan faster and pay less interest on their
Collectively, these changes will make housing loans more
readily available to residents in underserved communities, such as those
targeted by USDA’s StrikeForce initiative. Through StrikeForce, USDA staff work with state, local and
community officials to increase awareness of USDA programs that help rural
residents, businesses and communities.
As part of the overhaul, Rural Development has begun a
series of enhancements to automate processes, reduce paperwork and reduce loan
approval times. Additional program improvements are:
* Lenders may consider a home’s energy efficiency as a compensating factor
when underwriting a mortgage application. Energy efficiency is an attractive
feature for home buyers and sellers. Energy efficient homes help the nation
lessen its dependence on foreign oil and result in lower utility costs for
homeowners. Lower utility costs also improve the local economy by directly
increasing consumers’ disposable income;
* Lenders and borrowers no longer will be required to initiate separate
construction and permanent loans for new homes. Instead, there will be one
closing for one loan, known as a construction-to-permanent loan; and
* Lenders will be required to consider foreclosure prevention techniques
such as loan modifications and short sales. Currently, lenders are encouraged,
but not required to do so.
These changes will be fully outlined in a new handbook to
accompany program regulations. The handbook will provide a single reference
point on program rules for borrowers and lenders. It will replace more than 20
administrative notices that are written separately and must be updated
For additional details, see page 73927 of the Dec. 9 Federal Register. USDA welcomes public
comment on the changes. The deadline to submit comments is Jan. 8. See Page
73927 for information on how to submit comments.
Since the start of the Obama administration, more than
700,000 rural residents have bought homes with mortgages guaranteed by USDA
Rural Development. In many rural areas, the majority of homes are financed with
loans underwritten through this program.