U.S. Department of Agriculture (USDA) Secretary Tom Vilsack today announced a series of sweeping changes to a popular loan program for rural homebuyers. The changes are part of an extensive overhaul that will 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," Vilsack said. "The changes will add significant capital to rural areas and give rural Americans more opportunities to make financing decisions that lay the groundwork for the future prosperity of their families."
The changes are published in today's Federal Register. They take effect Sept. 1, 2014 and 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. With the rule change, 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 may underwrite loans guaranteed by Rural Development. This will enable many small community banks and credit unions to participate in the guaranteed loan program. Currently, these entities are not eligible lenders.
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 on their loan.