Lennox's Real Estate Blog

sharing my passion for real estate

Archive for the ‘USDA’ Category

Shop Talk With U.S. Housing Sec. Shaun Donovan

with 2 comments

Last week I had the great honor of being invited to meet with U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan and Assistant Secretary for Housing and Commissioner of the Federal Housing Administration (FHA) David Stevens. The meeting took place on September 23 at the HUD offices in Washington D.C.

The meeting was arranged by Sen. Patty Murray’s office for the purpose of discussing the systemic problems facing the housing market and ideas to stimulate recovery. The meeting was also attended by Travis Lumpkin, Sen. Murray’s legislative assistant on housing issues. We discussed the concept of an urban down payment assistance program similar to the USDA’s program which currently helps households purchase homes in rural areas with no required down payment (more details about the program can be found in this previous blog).

Secretary Donovan and Commissioner Stevens acknowledged that one of the biggest challenges facing qualified first time buyers is not affordability, but rather having the down payment. We also discussed the importance of State Housing Finance Agencies and the need to renew high balance loan limits – which Secretary Donovan stated HUD has just come out in support of. The maximum $729,750 loan limit for Fannie Mae, Freddie Mac, and Federal Housing Administration-backed loans in high-cost areas will expire at yearend unless policymakers act.

Without an extension, the maximum loan limit would drop back to $625,500 on Jan. 1, which would cause a significant drag on the fragile market. According to NAR’s deputy chief lobbyist Jamie Gregory, Sen. Murray, chair of the Housing and Urban Development Appropriations subcommittee, has inserted language into a HUD appropriations bill to extend the current limits.

This meeting could not have happened without the direct support of Sen. Murray and her staff and I am very thankful to them for providing me with this unique opportunity. Sen. Murray continues to be an advocate for housing and she is one of the few in Congress that understands housing issues. It is my opinion that losing her presence in the Senate would be a huge loss to our industry.

On the flight back to Seattle I reflected on the significance of this meeting and any results that may come from it. Then I decided that the ultimate outcome would be if President Obama turned to Secretary Donovan during a Cabinet meeting and asked him what his plan is for re-establishing a healthy housing market, and Secretary Donovan responds with “down payment assistance for urban markets”.

As always, thanks for reading.

Lennox

Written by Lennox

September 30, 2010 at 10:53 am

Funding For Guaranteed Home Loan Program Available 9-8-2010

with 8 comments

The following is very good news for homebuyers who qualify for the USDA’s loan program.

Rural Development’s interim systems enhancements will be complete on September 8, 2010, at which time the Agency will begin obligating Section 502 Single Family Housing Guaranteed Loans. See the link to the notice below for more details.

Single Family Housing Guaranteed Loan Program

Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories. Approved lenders under the Single Family Housing Guaranteed Loan program include:

  • Any State housing agency;
  • Lenders approved by:
    • HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;
    • the U.S. Veterans Administration as a qualified mortgagee;
    • Fannie Mae for participation in family mortgage loans;
    • Freddie Mac for participation in family mortgage loans;
  • Any FCS (Farm Credit System) institution with direct lending authority;
  • Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs.

Terms: Loans are for 30 years. The promissory note interest rate is set by the lender. There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.

Approval: Rural Development officials have the authority to approve most Section 502 loan guarantee requests.

For more information contact your lender – or visit www.responsemortgage.com to connect with someone from our mortgage partner.

Written by Lennox

September 7, 2010 at 11:12 pm

The Road To A Sustainable Housing Market

with 8 comments

The highly anticipated restoration of the USDA’s single-family rural housing program that guarantees home loans for rural buyers was passed by the Senate on July 28 and is on its way to President Obama’s desk for signature. With the support of its members, the National Association of REALTORS® has vigorously lobbied to restore funding for the rural program since last March, and hailed this development as a great victory for rural home buyers.

I couldn’t agree more.

But before I go into why I support this legislation, I’d like to provide a little background on the USDA’s Single-Family Housing Guaranteed Loan Program and why I believe it can serve as a successful model for a much needed urban down-payment assistance program.

According to Wikipedia, the United States Department of Agriculture was established by President Abraham Lincoln on May 15, 1862 in order to help out the United States economy. Through Federal funding, its purpose was the collection of agricultural statistics and other agricultural purposes; President Lincoln called it the “people’s department.” For many years, the Department of Agriculture was crucial to providing concerned persons with the assistance they needed to make it through difficult periods, such as the Great Depression; this included loans for rural landowners.

Fast forward 148 years and what we have now is a robust program that in 2009 provided over 140,000 loans and $16.6 billion in grants to achieve homeownership and improve housing in rural areas. They also funded $11.2 billion for direct and guaranteed single-family housing loans to provide additional credit for affordable home loans. USDA loans used to be considered “farmers’ loans” but that is no longer the case. Rural America is home to about 50 million people, but only 6.5 percent of the rural work-force is directly employed in farm production. This means that USDA must support not only the farms, but also the communities that surround and support them.

In 2009, the USDA enacted changes that provided assistance to millions of homebuyers who did not have the down-payment funds required by conventional loan programs. USDA loans currently stand alone as the only zero-money-down program available to borrowers who have not served in the military. And like their conventional counterparts, the USDA program adheres to strict underwriting standards, assessing each borrower’s credit, income, and cash flow. As a result, the agency’s portfolio of loans has a low default and delinquency rate of 1.72% (compared to a 2%- 5% default rate for conventional loans and 15% for subprime).

Earlier this year, the USDA exhausted its $13.1 billion funding, leaving many qualified homebuyers with few-to-no financing options and putting a squeeze on our nation’s economy. Thankfully, the Federal Government recognized this fact and responded by passing legislation that increases the Rural Housing Service (RHS) commitment authority allowing guaranteed loans. The RHS is expected to announce new guidelines shortly after the president signs the bill; one anticipated change is a higher “guarantee fee” of 3.5% that can be folded into the mortgage and will enable the program to be self-sufficient.  

Homeownership is historically an instrumental part of the U.S. economic engine, so it’s critical that we take measures to ensure that the housing market has a strong foundation for sustainability. I would argue that by creating a program similar to the USDA’s for city dwellers, there is the potential to bring in hundreds of thousands of homebuyers annually and billions of dollars in state and local taxes every year, as well as higher Federal Income Tax revenue (click here to read a detailed analysis).

The success of the USDA’s Single-Family Housing Guaranteed Loan Program proves that alternatives to conventional loan products can be successful and result in responsible, long-term homeownership with low delinquency rates.  Now is the time to expand the market and create a down payment assistance program for urban homebuyers who face similar challenges to their rural counterparts. Perhaps it could be called the United States Down Payment Assistance program—or USDPA. Has a certain ring to it, doesn’t it?

As always, thanks for reading.

Lennox

Written by Lennox

August 3, 2010 at 3:03 pm

%d bloggers like this: