USDA Housing Administrator Tammye Trevino announced on August 23, that implementation of the new funding fees for the Section 502 Single Family Loan Guarantee Program is expected by mid-September.
Legislation was recently signed into law giving USDA the authority to increase the up-front fee to up to 3.5 percent of the principal obligation and to charge a new annual fee of up to .5 percent of the outstanding principal balance. USDA’s office of Rural Development expects to complete an interim enhancement to its electronic systems by mid-September to accommodate the increase. When this interim enhancement is complete, Rural Development will process all Conditional Commitments issued after May 26, 2010, that had the proviso “subject to the availability of funds.” These Conditional Commitments will be processed in the date order by which they were received. As soon as the program is implemented, Rural Development will resume issuing standard commitments without the special “subject to” condition.
In the meantime, Rural Development will continue to accept completed loan applications and issue Conditional Commitments; however, no loan funds will be reserved for applications during this timeframe. Lenders may close the loan as scheduled but will assume all risk of loss for the loan until funds are obligated and the loan is actually guaranteed. Click here for a copy of the USDA August 23rd memorandum.
While the new law also gives lenders the authority to waive the fees for low income and very low income borrowers, USDA will not implement this provision in the near future. However, borrowers may be eligible for USDA’s Section 502 Direct Loan Program.
If you are a member and have questions, contact MHI Vice President of Regulatory Affairs Lois Starkey at firstname.lastname@example.org.