USDA has Almost Exhausted Funds for the Year

In Indiana a USDA Home Loan is the best loan available, allowing buyers to purchase a home with no down payment, and no monthly mortgage insurance.  A USDA Home Loan is such a popular loan that it has been running out of funds quicker, and quicker each year.  Each year, new funds are appropriated to allow the USDA Home Loan program to continue to operate.  This year is no different.

USDA sent out an announcement on March 10, 2010:

Notice of Funding

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.”  This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita.  Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.  Should you have any questions, you may contact the Single Family Housing Guaranteed Loan Division at (202)720-1452.

So, what does this mean

First, in years past when similar announcements were delivered, USDA will NOT issue conditional commitments for loans, as the program awaits new appropriations from Washington.  This means that lenders will not continue to close USDA Home loans in anticipation of new appropriations.

This could potentially mean that the USDA Home Loan Program will not get new funds until after it’s 2010 Fiscal Year End, September 30, and then not have funds available until November or even December.  Because of how weak the housing market and economy is, this scenario is very unlikely, and since a large portion of the USDA Home loans are utilized by first time home buyers.  The first time home buyer market is a portion of the economy that the government is trying desperately to help.

If you do not presently have an accepted purchase offer, or are attempting to purchase a short sale, you must get the offer accepted quickly to get your loan closed and funded before funds run out.  I would expect funds to be depleted by the middle of April.  If you are unable to get closed in time you will need to put down 3.5% for an FHA loan, or 5% for a conventional loan.

What can you do

Contact your members of Congress regarding this funding crisis and reiterate the negative impact to low-and-moderate income rural families and to rural communities (Basically ALL of Indiana).  Let them know that we need funds to get the housing market back on track.  The Department of Agriculture is obviously attempting to get additional funding, and pursing changes to the program that could help or possibly completely eliminate future funding problems, but they need our help.  Your elected officials contact information.

Available Funding:

Fiscal Yr 2010 Congressional Appropriated Funds:          $13.5 Billion

Fiscal Yr 2010 USDA Rural Obligations:                                  $9.7 Billion (as of 3/22/10)

Available Funds: $3.8 Billion

Basically, in half of the USDA fiscal year they have depleted their entire funds for the year

I will update you as more information comes available.