WASHINGTON—After months of silence, residential lenders have finally received some good news from the Rural Housing Service.
In a newly released letter, RHS administrator Tammye Trevino said the agency will start processing and guaranteeing loans in mid-September when the agency expects to complete an "interim enhancement to its electronic systems."
The RHS must update its software systems to accommodate a new premium structure passed by Congress in late July.
The agency insured about $13 billion in rural single-family loans until it ran out of loan commitment authority in May, several months shy of the end to its fiscal year. Since May, the USDA has issued conditional commitments to keep the lending program going.
"When the interim enhancement is complete, Rural Development will process all conditional commitments issued after May 26, 2010," Trevino says in the Aug. 23 letter.
Congress has authorized enough RHS loan guarantees to meet demand through Sept. 30—when the 2010 fiscal year ends, according to the USDA. The RHS program could run into another hold-up if Congress does not pass an agricultural appropriations bill or a continuing funding resolution by Sept. 30.
But it should be a short hold-up. The legislators want to adjourn by Oct. 9 to go back home to campaign for the November elections. This means Congress has to act on the appropriations bill or the continuing resolution before they hit the campaign trail.
Meanwhile, the RHS expects to complete all system upgrades for the new premium structure "as early as possible in the next fiscal year," the agency said.
On July 29 President Obama signed an emergency supplemental appropriations bill (H.R. 4899) that authorizes the USDA to increase 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.
The higher premiums are expected to make the RHS program self-funding so it doesn't have to depend on Congress for new loan commitment authority every year.
