Bennet's Proposal in Supplemental Bill Will Bolster Loan Program on Brink of Insolvency
Washington, DC – Michael Bennet, U.S. Senator for Colorado, applauded Congressional passage of key provisions that mirror legislation he introduced to bolster Rural Housing Service loan programs on the brink of insolvency.
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 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.
“In this economy, families in rural Colorado are having a tough time getting the credit they need to buy a home and put a roof over their heads,” said Bennet. “This program has helped bridge that need, but high demand in a down economy has brought it to the brink of insolvency. This common-sense fix will help extend the life of the program at zero cost to the taxpayer and at great benefit to rural Coloradans who want to fulfill their dream of owning a home.”
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-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 solid credit histories.
The Senate last week passed the Supplemental bill, which includes Bennet’s provisions to bolster the Rural Housing Service loan programs. The bill will now be sent to the President to sign into law.