Magazine article American Banker

Rural Housing Loans in a Hiatus

Magazine article American Banker

Rural Housing Loans in a Hiatus

Article excerpt

Byline: Brian Collins

Since May, the Department of Agriculture's Rural Housing Service has been offering conditional loan commitments to lenders, but few are willing to bite anymore.

Lenders that have used the conditional commitments still can't get their RHS single-family loans insured.

If the loans go delinquent before the RHS implements a new premium structure recently approved by Congress, the lenders could be on the hook for the losses.

Lenders are "hesitant" to use loan commitments without the full guarantee of the RHS, Vicki Golder, president of the National Association of Realtors, wrote in an Aug. 13 letter to Agriculture Secretary Tom Vilsack.

But it appears RHS will not be able to guarantee loans until October at the earliest, according to sources.

The program exhausted its regular loan commitment authority in May after lenders originated $13 billion in loans.

Instead of seeking additional loan commitment authority from Congress to keep the RHS program going, the Agriculture Department urged lawmakers to increase RHS premiums. This change would make the loan guarantee program self-funding and free it from the congressional appropriations process.

The self-funding proposal enjoys strong bipartisan support. But it was attached to a large emergency supplemental appropriations bill that got bogged down in a contentious debate over deficit spending. The bill did not reach the president's desk until July 29.

As approved by Congress, it raises the RHS up-front premium to 3. …

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