Senate Passes Bennet Rural Housing Loan Program Provision to Help Families Access Credit
Rural Housing Service Program Currently on Brink of Insolvency
Washington, DC – May 28, 2010 – (RealEstateRama) — The U.S. Senate today passed key provisions that mirror legislation Michael Bennet, U.S. Senator for Colorado, introduced to bolster Rural Housing Service loan programs on the brink of insolvency.
Bennet’s legislation 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-funding. It also would ensure that families in Colorado’s rural communities have the access to the credit they need to buy, build and repair their homes.
“Many families in rural Colorado depend on the USDA’s Rural Development’s loan guarantee program to buy their homes, and this bill will ensure that it can continue to help families,” said Bennet. “Without cost to the taxpayer, this bill will strengthen the program, make it self-sufficient, and help the housing sector recover in the long-term.”
“This is a definite victory for rural Colorado,” said Cris White, executive director and CEO of the Colorado Housing and Finance Authority (CHFA). “Continuation of USDA’s Rural Housing Service Loan Guarantee program is critical for our state’s small, rural lenders who rely on it to support their ability to make loans within their communities. Without the extension, funds for homeownership in non-urban areas across the nation would have been greatly diminished.”
“The Housing Assistance Council (HAC) congratulates Senator Bennet for his leadership on this homeownership program which provides opportunities not otherwise available to many rural families,” said Moises Loza, Executive Director of the Housing Assistance Council, a national nonprofit organization that works to improve housing conditions in rural areas. “By using fees to sustain the program, Senator Bennet’s legislation extends it without cost to the taxpayers.”
The Rural Housing Preservation and Stabilization Act increases the maximum loan guarantee fee that USDA’s Rural Housing Service has authority to charge for new housing purchases from 2.0 to 3.5 percent and allows an annual fee of not more than 0.5 percent per year on the balance of the loan. The bill would also enable the Rural Housing Service to waive these fees for low income borrowers for up to $679 million in loans. Together, these changes will enable the USDA-Rural Development’s Rural Housing Service to continue offering loan guarantees through the duration of the year and to become self-funding.
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.
