Bennet Bill to Bolster Rural Housing Loan Program, Help Families Access Credit Advances in Senate
Rural Housing Service Program Currently on Brink of InsolvencyMay 14, 2010
Washington, DC -Michael Bennet, U.S. Senator for Colorado, announced today that key provisions of the legislation he introduced to bolster Rural Housing Service loan programs on the brink of insolvency were included in a bill approved by the Appropriations Committee. That bill now goes to the Senate floor for debate.
U.S. Senator Herb Kohl (D-Wis.), chairman of the Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration and Related Agencies, included a modified version of Bennet's Rural Housing Preservation and Stabilization Act in H.R. 4899, the Disaster Relief and Summer Jobs Act of 2010.
Bennet's legislation would extend the life of the U.S. Department of Agriculture Rural Development's loan guarantee program without cost to taxpayers by slightly changing the program's fee structure to make it self-funding. It also would ensure that families in Colorado's rural communities have the access to the credit they need to buy, build and repair their homes.
"The USDA's Rural Development's loan guarantee program has helped countless families across Colorado buy homes in rural communities, but the program will no longer be there for families if we don't fix it," Bennet said. "This bill provides a common-sense solution that will strengthen the program, make it self-sufficient, and make sure it can continue to help families and the housing sector recover in the long-term."
"This program is one of the few remaining loan programs to support the fragile housing market in this country and a significant source of funding for home ownership in rural America. And it's now out of funds. I'm pleased to have worked with Senator Bennet to find a solution that will allow USDA to meet the demand this year without a cost to the taxpayer. This provision is not just important to the housing market, it's important for overall economic recovery," Kohl said.
The Rural Housing Preservation and Stabilization Act increases the maximum loan guarantee fee that USDA's Rural Housing Service has authority to charge for new housing purchases from 2.0 to 3.5 percent and allows an annual fee of not more than 0.5 percent per year on the balance of the loan. The bill would also enable the Rural Housing Service to waive these fees for low and very-low income borrowers for up to $679 million in loans. Together, these changes will enable the USDA-Rural Development's Rural Housing Service to continue offering loan guarantees through the duration of the year and to become self-funding.
The USDA's Rural Housing Service Loan Guarantee Program (Section 502 loans) provides loan guarantees to private lenders for low and moderate income families to purchase housing. Applicants for loans may have an income of up to 115 percent of the median income for the area. Families must be without adequate housing, but be able to afford mortgage payments, including taxes and insurance. Applicants must have reasonable credit histories.