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Health & Wealth Update
Wed October 16, 2013
Federal shutdown pauses rural mortgage service
A little known part of the U.S. Department of Agriculture’s Rural Development agency is one of the main sources of mortgage credit to low-income families in rural America.
The Rural Development agency provides mortgage credit in two ways: by acting as a lender, and by guaranteeing loans made by private lenders. During the shutdown, though, none of the Rural Development field offices stayed open. All employees were furloughed, which means no loans or guarantees could be processed. To better understand the shutdown’s effects on rural housing prospects, I talked to Joe Belden, deputy director of the Housing Assistance Council, a nonprofit that helps foster rural affordable housing.
What’s happening to the program, in light of the federal shutdown?
Belden: “People that had closings scheduled and have been approved for loans may not be able to actually buy their houses as long as the shutdown closes because USDA staff are not able to work the proper paperwork. The hit is for people that are trying to buy a home and have gone to the USDA for this guarantee, working with their local bank, but the local bank needs to have the guarantee paperwork and approval from the Department of Agricultre. In some cases the bank might go ahead and take their chance, but if I were the bank loan officer, I don’t think I’d want to do that. There are many people now who aren’t able to do their closing. The sellers may be willing to wait, or maybe not.
Can you tell me about the long-term effects of this?
In the past two years, the USDA has grown to be one of the main sources of mortgage credit in rural America. These programs in the USDA has been helpful in the housing recovery since 2008. Markets were starting to come back in the last two or three years, but this slows that down.
One St. Louis mortgage broker told the Post Dispatch last week that the USDA loans make up about 13 percent of his entire business