Agriculture Secretary Tom Vilsack today announced that USDA is adding Colorado and 14 more states and the Commonwealth of Puerto Rico to a pilot program that enables current USDA borrowers to save money on housing costs by refinancing their mortgages with lower interest rates. USDA Housing Administrator Tammye Treviño made the announcement on behalf of Secretary Vilsack.
“USDA’s expansion of this program will help more rural borrowers refinance their mortgages to reduce their monthly payments and ease their financial burdens,” Vilsack said. “As our economy continues to recover, this program will enable rural families living in USDA-financed homes to take advantage of historically low interest rates.”
USDA unveiled the initiative in 19 states almost one year ago. The additional states are being added because they have been identified as having a very high proportion of persistent poor counties, that is, those with a poverty rate of at least 20 percent in each of the last four U.S. Censuses. The performance of the pilot will be reviewed after two years to evaluate whether to continue, terminate or make the refinance program permanent.
Existing borrowers in the USDA Single Family Housing Guaranteed loan program and existing USDA Direct Loan program borrowers that want to refinance their Direct loans under the Guaranteed program are eligible to participate. Participants in this pilot refinancing program benefit from streamlined processing for Guaranteed loans. Borrowers do not have to obtain new credit reports, property inspections or home appraisals. They are required to meet income eligibility requirements, and must have made their mortgage payments on time for 12 consecutive months. Refinanced loans must be at least one percent below the original interest rate. Terms cannot exceed 30 years. No cash out is permitted to the borrower.
“This is a good opportunity for our current borrowers with higher interest rates to refinance under the Guaranteed Loan Program. Existing Direct borrowers receiving payment assistance will want to consider the combined impacts of the potential interest rate reduction, refinancing fees, and the discontinuance of payment assistance in deciding whether to apply for refinancing under the Guaranteed Program” said Jamie Spakow, Housing Programs Director in Colorado.
The pilot expands upon USDA’s ongoing effort to assist rural homeowners holding loans made or guaranteed by USDA Rural Development. In 2010, USDA established an aggressive modification policy for Guaranteed Loans that helps homeowners who are delinquent on their mortgages. These homeowners can lower their monthly payments through a loan modification that re-amortizes their payments over a term of up to 40 years, lowers their interest rate, or both. USDA also has a “Mortgage Recovery Advance” program in which the Department provides guaranteed lenders up to 12 months of mortgage payments on behalf of borrowers who have fallen behind on their payments due to job loss or other hardships.
Rural Development’s housing loans and grants make a significant difference in the lives of thousands of rural Americans across the nation. These investments boost rural economies and create jobs. The pilot refinance program complements President Obama’s continuing efforts to help responsible homeowners and boost the nation’s housing market. The measures the President and USDA are taking will help stabilize communities and help middle class families across the country.
USDA, through its Rural Development mission area, has an active portfolio of more than $176 billion in loans and loan guarantees. These programs are designed to improve the economic stability of rural communities, businesses, residents, farmers and ranchers and improve the quality of life in rural America.