USDA Rural Development System Upgrade Complete. Now Processing Conditional Commitments

In March we learned that USDA Rural Housingrn funds were expected to run dry by the end of April. </p

A month later, even though thernlegislation intended to provide the funding had not passed, USDA began issuingrncommitments for new loans, but there was a caveat: Loan approvals would be “subjectrnto the availability of funds and Congressional authority to charge a 3.5rnpercent guarantee fee for purchase loans and a 2.25 percent guarantee fee forrnrefinance loans.”  </p

Finally, on July 29rnCongress passed HR 4899 to reestablish the program as one that would no longerrnbe subject to the annual whims of Federal funding but self-sustaining through arn3.5 percent guarantee fee paid by the borrower.  </p

Four weeksrnpassed after the Congress did their job and appropriated unlimited funding for the USDA Rural Housing Program, yet all loans under Section 502  still had to carry the “subject tornavailability” caveat. This forced us to ask the question:  WHERE’S THE FUNDING  WHAT’S THE HOLD UP?  Shortly thereafter,  USDA issued THIS ANNOUNCEMENT which stated the following: “When Rural Development operation systems enhancements are completed, the Agency will notify the lender, and the guarantee process will continue subject to all applicable Agency regulations and conditions set forth in this Conditional Commitment. The lender will assume all risk of loss for the loan until Rural Development obligates funds and the Loan Note Guarantee is subsequently issued”. This left borrowers in limbo as many lenders simply stopped funding USDA Section 502 product as the early payment default (EPD) risk was just too much to take on in this lending environment. But the USDA said we should expect the completion of the interim system by “mid-September”. So we waited. </p

Well….It appears they got the job done a little faster than anticipated! The presser below was issued by the USDA to lenders. Hat tip: National Council of State Housing Agencies</p

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TO: Participating Lenders

FROM: Tammye Trevino, Administrator, Housing and Community Facilities Programs

SUBJECT: Single Family Housing Guaranteed Loan Program Funding Notice</p

Rural Development’s interim systems enhancements will complete on September 8, 2010, at which time the Agency will begin obligating Section 502 Single Family Housing Guaranteed Loans. The systems enhancements will:</p<ul