USDA 502 loans rescued

Like FHA loans, USDA-backed loans have been surging in popularity over the past few years due to tightening credit underwriting standards.  After doubling its loan volume from 2008 to 2009, the Rural Development 502 Single Family Housing Guaranteed Loan Program was on the brink of insolvency.

Uncle Sam to the rescue: Both houses of the U.S. Congress have passed bills to continue funding the USDA’s rural loan guarantee program. Rolled into the emergency supplemental appropriations bill that passed the Senate last week, the loan-guarantee program will see these changes:

The bill increases the maximum loan-guarantee fee that USDA’s Rural Housing Service can charge homebuyers from 2 percent to 3.5 percent and allows an annual fee of no more than .5 percent a year on the balance of the loan. The bill also allows the Rural Housing Service to waive these fees for some low-income borrowers. These changes will enable the program to remain financially solvent through the end of the year and to become self-funding…

The House and Senate still need to iron out some differences before sending the bill on to President Obama for signature.

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