Bennet Introduces Legislation to Bolster Rural Housing Loan Program, Help Families Access Credit

Rural Housing Service Program Currently on Brink of Insolvency

Washington, DC – April 29, 2010 – (RealEstateRama) — At a time when mortgage credit markets are still uncertain, Michael Bennet, U.S. Senator for Colorado, introduced a bill that will bolster Rural Housing Service loan programs on the brink of insolvency and ensure that families in Colorado’s rural communities have the access to the credit they need to buy, build and repair their homes.

Bennet introduced the Rural Housing Preservation and Stabilization Act, a fiscally responsible bill that would extend the life of the U.S. Department of Agriculture Rural Development’s loan guarantee program without cost to taxpayers by slightly changing the program’s fee structure to make it self-sufficient. The Congressional Budget Office estimates the bill will save $24 million in discretionary spending in FY10.

“Families across Colorado rely on USDA Rural Development’s loan guarantee program to buy homes in our state’s rural communities, but the program can’t keep up with demand and will stop if we do nothing to fix it,” Bennet said. “The common-sense changes in this bill will strengthen the program, make it self-sufficient, and make sure it can continue to help families and the housing sector recover in the long term.”

Rather than fall back on increased appropriations, the Rural Housing Preservation and Stabilization Act would enable the program to provide credit in a financially sustainable way by increasing the maximum up-front loan guarantee fee the agency can charge for new purchases from 1.0 to 4.05 percent. Additionally, the bill would increase the maximum volume of loan guarantees the USDA has the authority to make using existing funding sources.

The USDA’s Rural Housing Service Loan Guarantee Program (Section 502 loans) provides loan guarantees to private lenders for low and moderate income families to purchase housing. Applicants for loans may have an income of up to 115 percent of the median income for the area. Families must be without adequate housing, but be able to afford mortgage payments, including taxes and insurance. Applicants must have reasonable credit histories.