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Today, the U.S. House of Representatives passed H.R. 5017, the Rural Housing Preservation and Stabilization Act of 2010, introduced by Congressman Paul E. Kanjorski (D-PA), the Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, by a vote of 352-62. The vote now clears the legislation for consideration in the Senate.
“Today, the House passed my much needed legislation to help ensure that families living in rural America can continue to access USDA loan guarantees so that they can buy homes with affordable mortgages,” said Chairman Kanjorski. “Many people living in rural communities do not have as much access to affordable home loans. The USDA program works to fix this problem, but it could run out of federal funding in a matter of days. We must ensure that families continue to have options for accessing affordable home loans. My bill will enable the program to continue its good work at no cost to the taxpayers. I am hopeful that the Senate will soon act on these matters as Senator Bennet of Colorado has already taken the lead in pushing this issue in that chamber. I urge the Senate to act quickly and pass this legislation.”
The House Financial Services Committee unanimously passed H.R. 5017 last week. The bill ensures the continued access of rural homebuyers to affordable mortgages through the U.S. Department of Agriculture’s (USDA) loan guarantee program. The financial crisis has spiked consumer interest in the program, tripling the number of loans annually made since 2006. Because demand continues to grow, the program will exhaust its federal funding within days. H.R. 5017 would solve this problem by making the program self funded, enabling families living in rural communities to continue to access these loan guarantees.
“As a result of this program, I was able to purchase my first home which I have wanted all my life," said Virgie Spruiell from Bushkill, Pennsylvania. “I enjoy it every day and it is a blessing. I greatly appreciate Chairman Kanjorski's efforts to enable the program to continue so that other people can access these guaranteed home loans just as I did. It has had helped me tremendously."
Chairman Kanjorski’s legislation will correct the Section 502 Single Family Housing Guaranteed Loan Program funding shortfall by enabling the program to pay for itself, rather than relying on federal funding. In order to pay for the program, lenders will pay up to a 4 percent fee on new home mortgages and the USDA will have increased loan authority of $30 billion dollars for this fiscal year. As a result of these changes, financing of the program will move from a combination of government funding and industry fees to a self-sustaining initiative.
The USDA’s Rural Housing Service manages the Section 502 program, which provides a vital source of mortgage credit for people living in rural communities. Low- and moderate-income individuals and families in rural communities often have fewer mortgage credit options than those households in urban areas. The program aims to fill that void and lower the costs of homeownership by giving rural areas access to a home loan guarantee program. These guarantees decrease the exposure of home lenders to defaults so that they will underwrite more mortgages. In 2009, loans to more than 115,000 homebuyers guaranteed under the program averaged $112,000. To qualify for the program, borrowers must have good credit and reliable incomes to sustain homeownership.