Changes Set to Take Effect on USDA Mortgage Program
Several changes within the USDA mortgage program are in the works to take effect September 1st, 2014.
The U.S. Department of Agriculture (USDA) Secretary Tom Vilsack announced a series of changes to a popular loan program for rural homebuyers recently. The changes are part of an extensive overhaul intended to 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,” says a state director for USDA Rural Development, said. “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 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 to 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. This will enable many small community banks and credit unions that have not been eligible lenders before to participate in the guaranteed loan program.
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.
Other changes include enabling lenders to consider a home’s energy efficiency as a compensating factor when underwriting a mortgage; doing away with the need to initiate separate construction and permanent loans for new homes by creating a single construction-to-permanent loan; and requiring lenders to consider foreclosure prevention techniques such as loan modifications and short sales.
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 now written separately and must be updated annually.
Information via USDA
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