Washington, DC – July 30, 2009 – (RealEstateRama) — The U.S. House has passed legislation authored by Congressman Wm. Lacy Clay (D) Missouri, which will make refinancing easier for rural homeowners who hold mortgages issued by private lenders. H.R. 2043, the Rural Homeowners Protection Act of 2009, will allow rural families to refinance mortgages obtained from private lenders through a provision of a USDA guaranteed loan program.
In remarks on the House floor, Mr. Clay, who sponsored the bill on the House Financial Services Committee, said, “Under current law, rural families who obtained a mortgage from a private lender for the purpose of acquiring or constructing a single-family residence are not permitted to refinance such loans through the Section 502 Rural Housing Guaranteed Loan program. My bill would give the Secretary of Agriculture the authority to permit the refinancing of these mortgages through the Section 502 Rural Housing Guaranteed Loan program. Rural families who meet current income and geographic criteria would be eligible to refinance their private loan.”
The current foreclosure crisis is hitting rural America hard, as well as cities and suburbs. However, low-income rural homeowners are 98.3 percent successful when serviced through the Section 502 Single Family Housing direct or guaranteed loan programs. The foreclosure rate in both of these programs is below 2 percent as compared to the 5-6 percent subprime foreclosure rate overall.
Mr. Clay added, “This new authority for the Secretary of Agriculture will provide much needed relief to our rural housing community and complement efforts by President Obama to stabilize communities by helping struggling homeowners stay in their homes.”
The Rural Housing Service estimates that this new authority would significantly increase loan volume under the Section 502 guaranteed loan program. To address this issue, Mr. Clay’s bill also gives the Secretary of Agriculture the authority to charge a higher guarantee fee than the 2 percent fee that is permitted under current law to help ensure that the expected increased loan volume does not require additional tax dollars. The non-partisan Congressional Budget Office has projected that the bill is revenue-neutral.
The bill now moves to the U.S. Senate for further consideration
Contact: Steven Engelhardt (314) 504-4029