USDA Rural Development loans are back!

The USDA issued a memo yesterday, May 26, 2010, reauthorizing the issuance of conditional commitments for USDA loans. What that means is that your better lenders (the ones that usually close USDA loans while funds are waiting to be allocated) will immediately be able to continue closing loans. The amount that has been authorized is $2.5 billion and it's expected that new funding will be available from Congress before this is exhausted (there are currently a few bills, but HR 4899 is the most likely to pass quickly- possibly by today).

Do know this money comes at a cost. Per the memo, lenders are asked to call their state USDA coordinators to determine the amount of the guarantee fee that will be charged. This fee was 2% and it is generally accepted that it will increase to 3.5%. This means any loans, regardless of when the application was taken, that receive their commitment to fund from these new dollars will have the higher fee. I've spoken to a number of lenders and so far all are treating it as a legitimate "change of circumstance" that requires redisclosure of the good faith estimate and the truth in lending disclosures.

Also be aware there is a backlog of files that were not underwritten by USDA, This will likely result in delayed turn times from your USDA offices in the short term. Locally my office in Central Florida (Ocala for me- not Davenport!) is quoted 7-10 business day turn time.

Thankfully the increase in the guarantee fee will make the USDA Guaranteed Rural Development loan self funding- much like FHA. That means no more October delays and a much smoother future for the program, which remains the one of the last 100% financing programs in the country (VA is the only other one).

Gerry Suarez, Jr.

Your FHA Loan Pro!