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Will new USDA pilot program save local homeowners from foreclosure?

Posted on Tuesday, February 7, 2012 at 7:39 pm

U.S. Department of Agriculture announced the launch of a pilot program this week aimed at helping rural borrowers –like those in Moore County – refinance their mortgages to reduce their monthly payments.

This initiative is part of the Administration’s ongoing efforts to help middle class families, create jobs, and strengthen the economy, according to USDA officials.

The Single Family Housing Guaranteed Rural Refinance Pilot Program will operate in 19 states for homeowners who have loans that were made or guaranteed by USDA Rural Development. These states are among those hardest hit by the downturn in the housing market.

“Through initiatives like the one we are announcing today, we are taking aggressive steps to fight for middle class homeowners who have played by the rules and are trying to get ahead,” said Agriculture Secretary Tom Vilsack.

“This pilot program will help homeowners’ to take advantage of historically low interest rates, and by working closely with lenders, we are helping rural homeowners protect one of the most important investments they will ever make.”

USDA Rural Development estimates 235,000 homeowners will be eligible to refinance their loans, which is expected to save them considerable time and money. To be eligible under this pilot, borrowers must have made their mortgage payments on time for 12 consecutive months. They do not have to obtain new credit reports, property inspections or home appraisals. Refinanced loans must be at rates below the original interest rate. Terms cannot exceed 30 years. No cash out is permitted to the borrower.

The two-year pilot is open to homeowners in Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina and Tennessee. The performance of the pilot will be reviewed after two years to evaluate whether to continue it, terminate it or make it permanent.

The pilot expands upon USDA’s ongoing help for rural homeowners. In 2010, USDA Rural Development 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 reamortizes 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.

Allowing rural homeowners in good standing that have home loans that were made or guaranteed by USDA to refinance their homes will bring increased capital to rural America and ease the financial burdens on homeowners. This pilot program will not cost taxpayers additional dollars.

All USDA Rural Development housing loans meet rigorous underwriting standards and are made only to qualified borrowers. These are not subprime loans.

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.•

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