House Set to Extend Rural Home Loan Guarantee Program

The continued availabilityrnof government guaranteed mortgages for rural homebuyers was virtually assuredrnyesterday when the House Financial Services Committee voted to approve H.R.rn5017.  The unanimous vote will send thernRural Housing Preservation and Stabilization Act of 2010 to the full House ofrnRepresentatives where sources said it was fast tracked for a vote as early asrnnext week.

If passed, the bill willrncorrect the Section 502 Single Family Housing Guaranteed Loan Program to makernit self-funding.  Section 502 assistsrnhomebuyers living in rural areas to obtain affordable mortgages guaranteed by thernDepartment of Agriculture (USDA).  These loanrnguarantees have become enormously popular during the financial crisis and consumerrndemand has tripled the annual number of loans that are typically issued eachrnyear.  The program is set to exhaust its availablernfunds within days.   Under the newrnlegislation, lenders will pay up to a 4 percent premium for the guarantee atrnthe time the loan is initiated which will enable the financing of the programrnto move from a combination of government funding and industry fees to arnself-sustaining initiative. The bill authorizes the department to guarantee uprnto $30 billion in loans in FY 2010.

In order to qualify for thernprogram an applicant must have good credit and reliable and adequate income sufficientrnto sustain mortgage payments.  The averagernguarantee in 2009 was for a $112,000 mortgage.

In an announcement of thernbill's passage the Committee said that the program provides a vital source ofrnmortgage credit for people living in rural communities where low andrnmoderate-income residents often have fewer credit options than households inrnurban areas.  The USDA program aims tornfill that void and lower the costs of homeownership by giving rural areasrnaccess to a home loan guarantee program.

The bill was sponsored byrnCongressman Paul E. Kanjorski (D-PA), Chairman of the House Financial ServicesrnSubcommittee on Capital Markets, Insurance, and Government SponsoredrnEnterprises.  He said of the bill, “Sincernits creation in 1987, USDA's affordable rural home loan guarantee program hasrnhelped hundreds of thousands of families to realize the American dream ofrnhomeownership, including many in Northeastern Pennsylvania. As a result of thernunprecedented demand, the program is now unfortunately running out ofrnmoney.  At no cost to taxpayers, my bill will preserve the access ofrnmillions of families living in America's heartland to needed USDA loanrnguarantees, so that they can continue to buy homes with affordablernmortgages.  Without action, too many families in rural America will havernno options for getting home loans.  We cannot allow that to happen.”

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