WASHINGTON - The U.S. Department of Agriculture plans 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.
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 to participate. With the rule change, any lending entity supervised and regulated by the Federal Deposit Insurance Corporation, 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 loan.
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.
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.
Since the start of President Obama's 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.
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