The Community Home Lenders of America (CHLA) is warning that a planned relocation of Rural Housing Service personnel could disrupt the agency’s implementation of delegated underwriting authority for USDA-backed mortgages.
In a letter to USDA Deputy Secretary Stephen Vaden, CHLA urged the department to preserve staffing continuity while reorganizing Rural Development operations and moving certain Rural Housing Service functions from the Washington, D.C., area to St. Louis.
The concern comes just months before the scheduled Sept. 1 launch of the Lender Interactive Test Environment, or LITE, Delegated Authority Pilot Program. The two-year pilot will allow eligible lenders to approve loans without USDA’s customary pre-closing review.
“Federal government mortgage programs rely on personnel that are knowledgeable and experienced,” CHLA wrote.
The trade group said some senior employees could resign or retire rather than relocate their families, potentially reducing the institutional knowledge available to implement delegated authority, onboard lenders, interpret program rules, and assist with operational issues.
USDA publicly described the reorganization in June as a modernization effort designed to centralize loan origination, processing, and servicing while improving consistency. The department said “select” Rural Housing Service positions and functions would move to St. Louis, while state and field employees would remain in place.
CHLA characterized the directive more broadly, saying single-family housing personnel currently located in Washington have been directed to relocate. The association did not identify how many employees are affected or how many have indicated they will leave rather than move.
The staffing question carries added significance for lenders because delegated authority represents a substantial change to the Single-Family Housing Guaranteed Loan Program.
Under a final rule published in March, qualified lenders will eventually be permitted to approve eligible loans and obtain loan note guarantees with limited or no agency involvement. Delegated lenders will assume responsibility for both pre-closing approval and post-closing guarantee issuance.
To qualify, lenders must have participated in the program for at least two years and meet elevated standards for underwriting capability, delinquencies, defaults, and loss claims. USDA plans to phase in the program over at least three years while expanding its lender-monitoring and oversight functions.
NMP previously reported that delegated underwriting is intended to shorten approval times and align the USDA program more closely with Federal Housing Administration and Department of Veterans Affairs lending.
The change could make USDA loans easier for mortgage companies to originate by reducing agency review before closing. It also transfers more responsibility to approved lenders; however, making consistent guidance, onboarding, technology, and oversight important during the transition.
USDA’s final rule became effective June 17, although full implementation is scheduled for September 2028. The agency has said the number of lenders receiving delegated status will depend partly on systems development, staffing levels, portfolio performance, and its ability to implement enhanced oversight.
CHLA said the relocation could threaten that rollout if it results in the departure of employees with specialized program experience.
The association also noted that delegated authority could give lenders more flexibility to continue processing USDA loans during a lapse in federal funding, reducing the program’s exposure to the delays that can accompany a government shutdown.
CHLA, which represents independent mortgage banks, said its members have relied on RHS employees for technical assistance and program interpretations while the agency’s workforce has declined over the past decade.
“We are concerned that the proposed relocation of RHS employees to St. Louis, MO could undermine program performance,” the association wrote.
CHLA asked USDA to ensure that any staffing and operational changes allow the single-family program, including delegated underwriting, to continue operating efficiently. USDA had not publicly responded to the letter as of Thursday.
*This article was drafted with AI assistance and reviewed and edited by a human editor before publication.
