Lenders Looking for U.S. Guarantees Increase Rural Housing Mortgages
Not every niche of the mortgage business saw a retrenchment last year. The Rural Housing Service posted a 15% jump in volume for fiscal 2013, almost all of it from its homeownership guarantee program.
Total RHS loan and grant obligations came to $23.4 billion in the last fiscal year, according to an analysis of RHS data by the Housing Assistance Council, a Washington-based nonprofit. That was up from $20.4 billion in fiscal 2012.
The biggest bump came in RHS Section 502 single-family guaranteed loans, which were up $3.1 billion as lenders flocked to the safety of the federal guarantee as political in-fighting curbed the direct loan program. Section 502 guaranteed mortgages went from $19.2 billion in FY 2012 to $22.4 billion for fiscal 2013. Number of loans made increased by nearly 18,000 to 163,000.
As the guaranteed mortgage program took off, the Section 502 direct loan program fell off in FY 2013, from $900 million to $827 million. The number of direct loans fell by 800, to 7,100.
RHS is a unit of the U.S. Department of Agriculture, but the loans it makes are eligible to be packaged into Ginnie Mae securities and serviced just as Federal Housing Administration and Department of Veterans Affairs mortgages are.
RHS also provided $850 million in rental assistance and housing vouchers last year, down slightly from $900 million the year before.
Other losers included the service's rental housing loans. Direct rental housing loans fell by half, to $29 million, while guaranteed rental housing loans also fell by half, to $52 million. Multifamily Housing Preservation and Revitalization loans and grants dropped by two thirds, to $21 million.
The RHS single-family Section 502 mortgage program in recent years has "dramatically shifted away from direct lending in favor of loan guarantees," according to HAC's analysis of the data. "There has been a steady decline in the number of direct loans since FY 2006 (except for additional funding provided under the American Recovery and Reinvestment Act for FY 2009 and 2010)."
Fiscal 2013 "represents the lowest number of direct Section 502 loans made since 1961."
Another factor in the falloff in direct loans, according to HAC, was "significant differences between the House and Senate appropriation bills and a six-month Continuing Resolution bill severely limited available funding for direct loan programs during the first half of fiscal 2013."
The second CR of the year brought both good and bad news. It "restored a portion of the funding but a sequestration of funds coupled with another across-the-board reduction cut 7.5% from each rural housing program."
HAC pointed out that the share of Section 502 direct loans for very low-income households decreased last year to 39% of the total, while the number of direct loans for self-help housing increased by 160%.