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USDA Rural Development loans are NOT out of money, and other important facts…

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Last Friday the USDA formally announced it was entering its annual "roll over" of funding as of its new fiscal year October 1^st. This mainly administrative action results in USDA's funding being delayed until it's made available through the General Accounting Office (GAO). This by no means indicates the USDA is out of funds! What it does do is delay funding for loans and guarantees. While there are still a number of lenders that can and do close and fund loans during this period, the vast majority of lenders do not. This doesn't mean your loan won't close, it just means you may have to wait a bit. How long? Last year the funds were made available by October 17 and this year they expect funds allocated within three weeks.

This means you may have to wait that long to close your loan, or take your loan to a lender that does fund in anticipation of the new allocation. Do note, by the time you can get an appraisal recertified, docs transferred, loan re-underwritten, etc. it's rarely worth it so you're likely best off to sit tight with your lender and wait for a late October close.

The great news is that in spite of crushing volume the USDA actually has $2 billion in funds to carryover from last year! In Florida we went from 2084 loans to over 7000 last year. The increased volume has increased the time it takes to get approvals from the USDA so depending on your area you may need to add from 3 days to two weeks to the process. This will become very critical as we near the deadline for the Tax Credit and the desperate scramble to close by November 30, so plan in advance and plan accordingly.

Lastly for those lenders interested in learning more about the program, consider signing up for the WebEx training offered nationally. This link will take you to the registration page for more information.

Realtors and lenders, if you haven't familiarized yourselves with this incredibly successful 100% financing program you are missing the boat. Home buyers, if you haven't spoken to your lenders and Realtors about the program you may be missing out on the least expensive low down payment program available.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Posted by Gerry Suarez Jr- Your FHA Loan Pro! on 09/29/2009 05:37 PM

Comments (35)

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35 Comments on USDA Rural Development loans are NOT out of money, and other important facts…

SEP

I love to read a great post...keep them coming!

OCT

Jeremy, thanks for the encouragement!

Gerry - Thanks for the info, man. I'm calling my local office now:)

Thanks for the update. The challenge is getting sellers (especially REO banks) to accept UDSA loans.

In our market, turn-around times on USDA loans now exceed 60 days. There seems to be no logical explanation why, other than "they are short on funds". However, I continue to hear from other sources they aren't.

And Jeff, you are SO right. Not only that, but HUD has issues as well. I've had two deals fall through recently because HUD said the home was 203B insurable, but FHA said it wasn't. FHA is part of HUD...Go figure.

So nice to see this as a feature Gerry. We need to get the word out on RD loans - I push every chance I get and have written a couple of posts in Localism on the subject. The guaranteed loan program is an excellent option for first time buyers buying in rural areas. (Less than 20,000 residents). In my area it doesn't work for Iowa City, but it's great for North Liberty.

We don't have any trouble with sellers around here accepting USDA loans, although I can't speak for REO transactions. (Not too many of them here, most of our listings are regular resale properties).

Thanks for the info. Great post.

Denise

Great post Gerry- We use the USDA financing a lot here in the Western Washington area. It is the only zero down program available to non vets. It is a very good program and we are experiencing 40 day after USDA get the loan packet from the lender, who usually has it for at least 25 days. We are reccommeding to our buyers to be prepared not to close sooner than 85-90days from mutual acceptance. Of course, if we close sooner, we look like superstars that we are.

Sardi- you'd think you would know by now where to get your RD info :). Heck you even got a copy of the original email where most of this info came from, but then we all know you're well connected. Thanks for the support buddy!

Jeff-thankfully our market here in Central FL has enough inventory that seller/lenders are still pressured to get a deal in ink. Also I will admit a quality prequal letter and open communications from the outset has helped many a deal get done. Thanks for the comment!

Todd-most delays these days are coming from the USDA itself. Many people don't realize after a lender's underwriter approves the loan it must go to USDA for further review/approval. The loans are then reviewed again post closing so each one is actually looked at twice by the USDA. This has resulted in some slow downs.

Now regarding your FHA/HUD issue, I hate to say this but if that's really what you were told it was a snow job. HUD and FHA are the same thing. The 203b is the type of FHA loan you were likely using and the property either was insurable or it wasn't. I'd be happy to review the details if you contact me.

Denise-thanks for carrying a touch for the RD program, and glad to see you haven't had to deal with many REO's!

Terry- thanks for the heads up, I now know not to complain about our turn times here in FL!

Gerry, good to hear,here in Johnston County the whole county is eligible. My last listing sold using it.

The USDA loans are a great way to go if you meet their criteria. I know of a few banks that do the carry over loans.

I thank you for this helpful information. Quite a few of my contacts need a 100% loan.

Gerry--This is a great program that is being used in several counties just outside of the Twin Cities in MN. Glad to hear it is working in so many other communities across the country!

Hi Gerry -- Wow, those are some impressive FL #s. I'm glad to see this program is well utilized.

OCT

Geesh! This is an ANNUAL thing? I really wish I had known this 2 years ago. My client and I were in a tail spin, the Seller was going crazy, local agencies new nothing about it and we were told that we may not get funded. All because the newbie to the process (me) and all the experienced folks were misinformed. THANK YOU Gerry - a valuable piece of knowledge to stick in my hat. GREAT post ...

Remember the FmHA days in the 1980's where they had a program..just no funding which is a quick way to kill a program. Or there was money for a large family with low low income, lots of it but no moderate income family money. The funds came in and out like the surf..sometimes they did not come in. But many many homes bought with a dollar done, reduced subsidy payments and then interest recapture guidelines came in and the program morphed, changed, was under constant overhaul and reinvention.

Hi thanks for the update. I was wondering what the time line would be. My listing was set to close on 10/5. We are now waiting...... :( Such is the RE world!

Gerry... thanks for putting this out there and again, squashing the rumor that USDA ran out of money. Only the Bank of Belonger has run out of money... lol Seriously, thanks for putting this update out there..,.. good job.

jeff belonger

Gret post. Our office was told by the local USDA field office that they would still be issuing conditional guarantees and that they expected funds around Mid Oct. We are still submitting deals with anticipation of these funds.

Terry you may find this link helpful (if you dont have it) for your timelines for closing which shows the dates the Olympia office is working on: http://www.rurdev.usda.gov/wa/

I can't believe these turn times I am hearing. My last one (last month) took about 4 days at USDA office. Start to finish was about 35 days.

Now if only we could qualify for these funds around here. Anything to get a loan for someone.

David-and I have many Realtors locally advertising USDA eligibility to encourage buyers and let them know they can get in for $0 cash. Try it, you will like the results!

Russ- I take it you're referring to banks that will fund/close loans during the rollover. There are not many of us here in my market but I'm glad your market seems better in tuned with the program.

Sybil- glad the info was of use and thanks for commenting.

Teri-beleive it or not there are still many eligible areas where the program just hasn't made an impact. Keep spreading the word in your market though and thanks!

Chris- so much more utilized now, and so very desperately needed. Thanks for commenting.

Great clarification. We have quite a few areas in the Phoenix area that qualify, so this loan come in handy.

Thomas - When I first heard this I panicked briefly until I realized they were just waiting to refunded. I have pending USDA deals so it was pretty scary for a minute.

Beth-now you see why Belonger, Sardi, Burris, Cook, Kappre and all of us experienced and knowledgeable lenders are always urging you to be careful who you work with. Experts aren't a dime a dozen, but they are worth a million bucks! Anytime you need to know...:)

Andrew-FmHA? Local or is it even before my time? The funds for USDA are very predictable though so don't let anyone try to fool you into thinking otherwise. With it's growing popularity I expected to see resources/$ further strained but it hasn't happened yet.

Amy-Based on what the USDA is publicly saying now we will likely have allocation in place by the third week of October. Keep an ear to the ground after the 15th as it can happen any day after that, and make sure your lender has the proper MDIA disclosures so you can close right away!

Jeff-bank of belonger is fixin' to burst, but that's another topic right? Thanks for the comment buddy- it only goes to show how bad we need to do what we need to do.

John- yes the USDA commitment actually reads "The Agency will continue to accept complete loan applications and issue Conditional Commitments "subject to the availability of congressionally appropriated funds." , but many lenders will not fund in anticipation of these funds, even though it's common knowledge they will be there. Go figure right- our business makes no sense at all! Thanks for the comment.

Steve-makes us appreciate what we do have right? I'm running right there as well but foresee a bit more delay on both sides of u/w to happen soon. Trying to cut some of the lost time out of the front end but MDIA is tying our hands there...

Gotta love the freakin' governmnet for messing things up- and we want to give them healthcare? Thanks for the comment!

Gene- I haven't looked to see where you are yet but do know even in Florida- 4th most populated State as I recall, we only have two counties that are completely ineligible. You might want to look here http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Senor Suarez...I have RETURNED!

#1. great blog...I will reblog it today too!

#2. In regards to #5 comment....delays can happen for MANY MANY reasons. It could be a FORM change that the broker/correspondent or Mtg Banker was not aware of...and many other things..>BUT, I have found that the FUNDER/LENDER OVERLAYS are where the delays begin & end. Contrary A LITTLE BIT to Gerry's retort...We as mortgage brokers have found that CHASE/WELLS and others have MUCH MUCH MUCH tougher requirements than the USDA itself. For example, regarding handling an "as improved" value on an appraisal...USDA will fund up to the VALUE of the home..So, for example, if the contract Sale price is 110k, and the house appraises at 119, they will fund an additional 9k in repairs or improvements. HOWEVER, and this is where it get's tricky....some funders dont utilize this program...WELLS FARGO doesnt. JP MORGAN CHASE DOES, but they will only limit the improvements to 10% of the sale price. Once again, the FUNDER, or LENDER has a TOUGHER requirement than the actual USDA.

Delays normally occur with people who dont know what they are doing, processors that are confused, or it might actually be that the MORTGAGE BANKER, or BANK, has a "selling" issue between them and the USDA! In our area, if a file makes it to the USDA on a Thursday, it is u/w normally the next day! A chimp tho could underwrite it at the point, because the FUNDER has already been WAYYYY tougher on it!

Relationships with the USDA are NO DIFFERENT than that of one with a customer, or FUNDER! They MUST be fostered!

This is the best program out there if the home, area, and income qualify! It should be utilized more!

Gerry, great job as usual on getting this out there!

Darin

aka: Bucky

Good and informative post

Rashel- glad to hear the program is doing you well out there. Keep talking it up- it is THE cheapest program even when you consider VA 1st time use!

David- these days we are all on edge awaiting bad news anyway right? This is one issue that fixes itself every year, we just have to plan for it!

BUCKY'S BACK! dude you've been sorely missed! Thanks for the comment- and dude note that #5 was talking about FHA not USDA. Lender overlays aside if he was told that HUD has one rule and FHA had another that was a line of bull- like so much we hear about these days.

I agree totally with you on the overlays though. The tail is wagging the dog in our business and it's getting crazy. GREAT TO HAVE YOU BACK!

Greater Mortgage- thanks for the good word and for commenting.

Remember however that when the home is sold the buyer may have to give up some of the equity for the good terms they get on the front end.

Not out of money, but in Alabama they are taking a long time to approve and fund!

Mark- huh? if you mean the buyer may actually have to come to closing with cash if they sell quickly that would of course be the case, especially in a flat or depreciating market. Considering the low guarantee fee (lower than VA) and the lack of monthly MI (unlike FHA) it would be hard to say it's a bad deal.

Julie-Those delays are likely to get a little longer before they get better too. Just try to plan ahead if you can, and thanks for commenting.

Gerry,

That's good news. USDA mortgage has become an important player in our marketplace, too. I'll reblog this to spread the word to my readers.

In our part of PA, almost 100% of the houses here qualify for the USDA program. It's a great deal and worth waiting for.

OCT

Esko- the lack of synergy between the income restrictions and home prices kept USDA on the sidelines for years, but now with prices dropping faster than income, the program has come front and center again. Thanks so much for the re-blog and the comment!

Erica- I know the feeling! My primary market in Lake County, FL is 100$ eligible too. It is SOP to test every buyer for the USDA RD program at this point. Thanks and keep it up.

OCT

Hey there G man!

I am moving today and tomorrow...but will be revisiting things with the team next week I think!

Keep blogging about the best product out there, no matter what the FHA expert says! :)

Thanks guys! You are awesome!

D Man

aka: Bucky

OCT

I guess we should all be aware when working with RD loans in the month of October. The time frame came be longer than anticipated.

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