USDA Loans Will Be Out Of Funds Soon

I received an email from a senior Wells Fargo loan consultant today regarding USDA loans. In short, she informed us the news that USDA loans will be out of funds soon. For those of you who have never heard of USDA loans, below is the brief definition I found online. You can also visit the USDA official site: http://www.usda.gov/.

"A USDA Guaranteed Loan is Government insured 100% purchase loan. These Loans are only offered in rural area's and serviced by direct lenders that meet federal guideline's."

Mason County in Washington state is considered a rural area. Many of the homes on the market for sale qualify for USDA loans so this news will affect many home buyers in Mason County who want to take advantage of the USDA loans in purchasing your future homes.

USDA will be out of fund and will not be giving conditional commitment to funding....... so no new applications are being taken at this time....

Please ready and take action....

Every year USDA runs out of money for their fundings and normally you are not affected by this however, this year is very different. The USDA Section 502 guaranteed Rural Housing Program will have exhausted there 2010 fiscal funds by the end of April. The USDA would need to receive about 150 million in funding to be able to continue funding loans for the rest of fiscal year 2010.
In past years USDA has appropriated funds from other areas to make up for the shortfall in funding dollars giving lenders the oppurtunity to continue to fund USDA loans. Why is this year any different then past years? USDA is removing the “subject to receipt of appropriated funds” from their conditional commitments meaning there is no guarantee that lenders will be able to guarantee the loan and fund it. Why are they doing this? The money usually runs out around the end of the government’s fiscal year which is September 30th and USDA basically tells everyone we’ll get you’re funding commitments either this year or next. Since the money is running out so early in the fiscal year USDA is not sure where the money will come from therefore will not put “subject to receipt of appropriated funds” on their conditional commitments. Last year the money ran out in March but the stimulus provided the gap funding to carry the program thru to the end of the year but this year there is no stimulus money.

What can you do as a Realtor, Builder, Developer or loan officer? You need to contact your US Congressman, US Senator, professional lobby and employer to get them working on a solution because if this happens many homeowners will be left out on their loan closing because it simply won’t happen. The USDA loan program is a wonderful program for Rural America. The program is ran very efficiently and the default rate on USDA loans are much lower than FHA or other financing programs.