USDA Doesn’t Lend Money – So How Can They Be Out???

It is amazing to me to see how many phone calls we are getting from around the country asking how we can still do USDA Rural Housing loans since they are “out of money”!  It is a misconception that the USDA lends money – they don’t!  Their role in the USDA Rural Housing Loan is to guarantee (insure) the loan against default.  That is why the have the 2% funding fee as opposed to monthly mortgage insurance.

Currently, they have used the entire appropriation that was given to them by Congress for FY2009; however, they are still issuing conditional guarantees that say “subject to new Congressional appropriation”.  In fact, a mortgage lender or broker used to have to reserve funds for this program but this year you don’t because they have been told that they have appropriations that are perpetual, meaning that they will be reissued but they have to go in front of Congress to have them signed.

While many lenders and brokers are finding that their investors (the ones that actually DO lend the money) are not willing to fund these mortgages until those appropriations are signed by Congress, we at Northstar Mortgage Group are still originating, closing and funding USDA Rural Housing mortgages.  We had one that closed Friday, one closing tomorrow, and two closing on Tuesday and they are being funded!  It is up to each individual investor as to whether or not they will take the chance and our investors firmly believe in this program and in Congress to appropriate additional funds for guarantees so they are allowing us to continue to close these types of mortgages.

Because of this lack of belief on the part of many other investors, we even got 4 new mortgages in from other lenders/brokers this week that will be closed by the end of next week.  We underwrite the USDA loans in house, we fund with our own money, and are able to get them closed quickly.  If you are being told that your lender won’t close on this program and you have a contract expiration, please feel free to contact me and let’s get your loan closed while others stand on the sidelines saying they can’t be done!

USDA Proposed Income Limit Increase Postponed

Even though we had it on good authority (we even had it in writing that unless someone complained it would take place January 20), USDA has postponed the 2-tiered income system, which will allow more buyers to qualify for this program, until March 20.  I have heard that the reason for this postponement is that they have already used their FY2009 congressional appropriations in the first quarter, from October 1, 2008 – December 31, 2008 (actually, I believe they were used up as of January 9, 2009).

While they have used all of the current appropriated funds, USDA RURAL HOUSING LOANS ARE STILL ABLE TO BE ORIGINATED AND CLOSED!  Here in our market, there are several lenders telling Realtors and clients that “USDA Rural Housing is out of money”.  Congress has promised a perpetual appropriation this year and it is up to the discretion of the lender if they decide to move forward and continue doing these mortgages.  Also, it is important to note that the USDA does NOT lend money; they insure loans.  The investors are the ones that provide the money and our investors are still doing exactly that.

Here at Northstar Mortgage, we are still able to do them and to get them to closing!  We are having no interruption of business with the USDA Program at all.  If you are buying a property, or a Realtor who has sold a property, in FL, AL, GA, NC, SC, or TN and need it to get to closing quickly on the USDA Program, please have your client contact me or you can contact me.  I hate to think that because some people are not doing these loans while others are that some buyers and sellers may lose the ability to get their loans closed and miss out on the great rates that we are currently able to get.  I recently locked in a USDA program mortgage on a 30 year fixed rate mortgage at 4.875% with NO POINTS and NO ORIGINATION FEES!  These rates won’t last forever so don’t miss out on this great opportunity to buy a home, or have your clients get a home, with NO MONEY DOWN!