The continued availability of government guaranteed mortgages for rural homebuyers was virtually assured yesterday when the House Financial Services Committee voted to approve H.R. 5017. The unanimous vote will send the Rural Housing Preservation and Stabilization Act of 2010 to the full House of Representatives where sources said it was fast tracked for a vote as early as next week.
If passed, the bill will correct the Section 502 Single Family Housing Guaranteed Loan Program to make it self-funding. Section 502 assists homebuyers living in rural areas to obtain affordable mortgages guaranteed by the Department of Agriculture (USDA). These loan guarantees have become enormously popular during the financial crisis and consumer demand has tripled the annual number of loans that are typically issued each year. The program is set to exhaust its available funds within days. Under the new legislation, lenders will pay up to a 4 percent premium for the guarantee at the time the loan is initiated which will enable the financing of the program to move from a combination of government funding and industry fees to a self-sustaining initiative. The bill authorizes the department to guarantee up to $30 billion in loans in FY 2010.
In order to qualify for the program an applicant must have good credit and reliable and adequate income sufficient to sustain mortgage payments. The average guarantee in 2009 was for a $112,000 mortgage.
In an announcement of the bill's passage the Committee said that the program provides a vital source of mortgage credit for people living in rural communities where low and moderate-income residents often have fewer credit options than households in urban areas. The USDA program aims to fill that void and lower the costs of homeownership by giving rural areas access to a home loan guarantee program.
The bill was sponsored by Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. He said of the bill, "Since its creation in 1987, USDA's affordable rural home loan guarantee program has helped hundreds of thousands of families to realize the American dream of homeownership, including many in Northeastern Pennsylvania. As a result of the unprecedented demand, the program is now unfortunately running out of money. At no cost to taxpayers, my bill will preserve the access of millions of families living in America's heartland to needed USDA loan guarantees, so that they can continue to buy homes with affordable mortgages. Without action, too many families in rural America will have no options for getting home loans. We cannot allow that to happen."
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