No USDA Rural Loan Funding Problems Here - October 2011 USDA Rural Loan Funding Update
Great News! I have no problems with USDA Rural Loan Funding. Unfortunately not all lenders are able to make this claim.
Many homebuyers using the No Money Down USDA Rural Loan, who were anticipating closing on a home purchase or refinance in October, were told by their lender that they will not be going to settlement since “USDA has run out of money”. Worse still theses lenders can’t even provide a date for when they can get their borrowers to settlement since no one knows when USDA Loan funding will be restored
This has become a fairly regular cycle with USDA Rural Loans in which USDA Loan Funding has been depleted before the end of the Federal Governments fiscal year in September or the Federal Government budget has yet to be enacted prior to the beginning of the fiscal year. In this case, with the start of the Federal Government’s 2012 fiscal year, funding for USDA Rural Loans has not been approved, despite the fact that USDA Loans are now considered “budget neutral” and don’t cost the U.S. Taxpayer anything.
So what happened? On September 30, 2011 USDA provided notice that:
"Funding for the Single Family Housing Guaranteed Loan Program (SFHGLP) will not be available for a short period of time at the beginning of Fiscal Year 2012 (FY 2012), which starts October 1, 2011. During the temporary lapse of funding, Rural Development will issue Conditional Commitments "subject to the availability of commitment authority" for purchase and refinance transactions.”
Upon receiving this notice many lenders immediately stopped funding USDA Loans. A similar statement was most recently issued in Spring 2010 and once funding was restored in September 2010, USDA went back and started issuing full USDA Commitments without any further restrictions on the loans that they had initially approved “subject to the availability of commitment authority” during this time period.
Now some good news came out today in which Congress has temporarily put in place funding through a Continuing Resolution which expires on November 18, 2011. So loans that are already at or about to be sent to the local Rural Development Office should be funded. However, unless Congress approves a budget in full prior to November 18th there is an excellent chance USDA funding will once again be turned off. Based on the ability for Congress to get anything done these days I fully expect that in 30 days USDA Funding will once again be "subject to the availability of commitment authority".
So why can one lender fund a USDA Rural Loan while other lenders don't fund USDA Loans? It all has to do with the intentions and financial strength of the end investor. Since many lenders are nothing more than pass through points for a loan, which is then resold to another lender, these lenders are unable to resell the loan until a full USDA Commitment is issued. By not being able to quickly resell the loan after settlement, lenders have to hold onto the loan and can’t replenish their credit lines by passing the loan on to the end investor, which in turns hampers their ability to originate other loans.
Bottom line, as a Mortgage Broker I exclusively send all of my USDA Loans to the largest Rural Development Lender and one of the largest banks (with over $2 Trillion in assets) in the United States. Because of the financial strength of this lender there aren’t any challenges with USDA Rural Loan Funding the loan based on receiving a Conditional Commitment Vs. a Full Commitment. And since my lender has yet to sell or transfer any of the USDA Loans that they have originated and funded since 1992 they have no pressure on when they receive USDA Full Commitment.
To learn more about your USDA Loan Financing options using the USDA Rural Loan Program go to USDARuralLoan.com or email info@USDARuralLoan.com. I specialize in USDA Loans, approved to lend nationwide, and can be reached at (866) 747-2882.