USDA improves loan program for single-family housing
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[December 20, 2013]
WASHINGTON — Last week, U.S. Department of
Agriculture Secretary Tom Vilsack announced a series of sweeping
changes to a popular loan program for rural homebuyers. 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," said
Colleen Callahan, Illinois director for USDA Rural Development.
"Since the inception of the program, more than 54,000 rural
residents in Illinois have received mortgages guaranteed by USDA
Rural Development. This program gives rural Americans more
opportunities to make financing decisions that lay the
groundwork for the future prosperity of their families."
The changes were published in the Dec. 9 Federal Register.
They 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 to participate. 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
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 loan.
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:
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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
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 annually.
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.
Page 73927 for information on how to submit comments.
[Text from file received from
USDA Rural Development]