WASHINGTON-Since May, the Rural Housing Service has been offering conditional loan commitments to lenders, but few are willing to bite anymore.
Lenders that have used the conditional commitments still can't get their RHS single-family loans insured.
If the loans go delinquent before the RHS implements a new premium structure recently approved by Congress, the lenders could be on the hook for the losses.
The National Association of Realtors has called on Department of Agriculture officials to restart the RHS program immediately.
In a letter to Agriculture secretary Tom Vilsack, the NAR noted the lenders are "hesitant" to use loan commitments without the full guarantee of the RHS.
"The objective of the new law was to restore the program and NAR implores USDA and RHS to be proactive in implementation. Rural homeowners should not be denied access to a program Congress has restored," NAR president Vicki Golder says in the Aug. 13 letter.
But it appears RHS will not be able to guarantee loans until October at the earliest, according to sources.
The RHS program exhausted its regular loan commitment authority in May after lenders originated $13 billion in loans.
Instead of seeking additional loan commitment authority from Congress to keep the RHS program going, the USDA urged the lawmakers to increase RHS premiums. This change would make the loan guarantee program self-funding and free it from the congressional appropriations process.
This self-funding proposal enjoys strong bipartisan support. But it got attached to a large emergency supplemental appropriations bill that got bogged down in a contentious debate over deficit spending. The bill (H.R. 4899) didn't reach the president's desk until July 29.
As passed by Congress, H.R. 4899 raises the RHS upfront premium to 3.5% for homebuyers and 2.25% for refinancings. Previously, the upfront premium was 2% for homebuyers and 0.5% for refinancings.
Lenders were hoping RHS would immediately restart the program and start insuring the loans. But the state and regional RHS offices told lenders they couldn't approve loans until they receive guidance from Washington.
Lenders were also told the RHS needs to update its automated underwriting system (which is called GUS) to implement the new premiums. "These updates could take up to four weeks to complete," one RHS state office said in a memo to lenders.
Some RHS supporters were aghast that the agency had not started the system changes to GUS while H.R. 4899 was trapped in the legislative logjam.
Nevertheless, implementation of the new premium structure is underway.
"We are moving forward now," said RHS administrator Tammye Trevino.
In an Aug. 12 statement, the RHS administrator stressed the changes are being made to internal underwriting systems and the RHS will provide additional guidance on these changes in the near future.
She did not provide a timeline, but some sources expect the updates won't be ready until sometime in the fourth quarter, possibly by the end of October.
"In the meantime, lenders will be provided with commitment letters to honor loan guarantee requests upon completion of the internal system updates," Trevino said.
