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!