Why the "Farm Bill" Can Save the USDA Home Loan
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Why the "Farm Bill" Can Save the USDA Home Loan

December 2, 2013

On Oct. 1, 2013, more than 900 rural communities, along with millions of low-income rural families, will lose their eligibility for what is often their only source of federal affordable housing assistance. On June 10 of this year, the Senate passed the Farm Bill, a bipartisan bill that will reduce the national deficit, save taxpayers money and will abolish outdated government programs, while consolidating and streamlining others, allowing for rural American communities to be modernized and updated for the 21st Century.
The bill's proposed programs and initiatives would allow for greater accessibility of USDA programs to small, rural communities nationwide. The Rural Housing Section 502 loan program, which is primarily used to help low-income individuals or households purchase homes in rural areas, are advantageous in providing opportunities for homeownership for families living in rural communities. These loans can be used to build, repair, renovate or relocate a home or to purchase and prepare the building sites. This also includes water and waste water programs that will assist rural dwellers with well water improvements, and it will also assist those areas that need water improvements and clean up.
The Farm Bill includes language to ensure that rural communities that are currently eligible for USDA’s rural housing programs and would lose eligibility due to USDA’s use of 2010 Census data are able to continue their eligibility through 2020. The bill raises the population limit used to define an area as rural from 25,000 to 35,000. To maintain rural eligibility, communities would still need to be rural in character and have a serious lack of mortgage credit for lower and moderate-income families. Communities should not be excluded from rural housing programs because they have outgrown an arbitrary cap that has not been adjusted to reflect demographic trends. It is important to realize that the bill is revenue neutral. It does not expand funding levels for rural housing programs. It updates the pool of communities eligible for its services. Without Congressional action, the current definition of "rural"—for USDA Rural Housing programs—will expire, leaving these families without the help they need to access clean, decent, and affordable housing.
The USDA program continues to be the only source of non-military 100 percent financing in the marketplace. In 2012, before the Refinance Pilot Program was released in March, 97 percent of Rural Development (RD) production was purchase money and after its release, 92 percent of total production are purchase transactions. All 50 states currently have areas of eligibility. USDA offers some the lowest rates of any loan and you will always have a fixed interest rate in the market.
Even today, many lenders don’t actually have much experience in approving USDA loans and take a “learn as you go” approach, which isn’t always great for homebuyers. Truly understanding the USDA eligibility requirements and how to approve these loans is important. For this reason, it is important for homebuyers to work with a mortgage company that “gets it” when it comes to USDA loans. Doing so will insure that their loan will close seamlessly and under the quoted terms.

With more than 25 years in the mortgage industry, Rich Obermeier, branch manager for GSF Mortgage Corporation, has worked with some of the largest mortgage companies in the county developing retail and wholesale channels. Rich has assisted in developing and implementing operational protocols for sales managers, originators and loan processors. In recent years, Rich has developed the USDA Rural Development Product in multiple states and locations. Rich may be reached by phone at (262) 957-8901 or e-mail robermeier@gogsf.com.