Rural Americans rely on programs like the 502 Rural Housing Loan Program to provide them with services that can be difficult to come by in some communities. Section 502 loans can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities. There are two different programs: the guaranteed program, and the direct loan program. Guaranteed loans are funded by private lenders, and simply insured by the RHS. The Guaranteed loans are self-funded and budget neutral, meaning the fees paid for borrowers fully pay for the program, placing no burden on American taxpayers. Direct loans benefit very low income or low income borrowers with funds loaned directly by the Rural Housing Service, without the use of private lenders.
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Regulatory Contact(s):Sehar Siddiqi,
What is the fundamental issue?
Rural families face unique difficulties in finding access to safe, affordable mortgage financing. Programs like the Rural Housing Section 502 loan program are instrumental in providing opportunities for homeownership for these families. Section 502 loans can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities. These loans are funded by private lenders, and simply insured by the Rural Housing Service (RHS).
I am a real estate professional. What does this mean for my business?
Rural housing programs provide much needed affordable mortgage financing to unserved markets and are instrumental in providing affordable housing opportunities to low and moderate-income rural homebuyers.
NAR supports federal programs for home loans, rental development and rental assistance, including those of the RHS. NAR believes the current definition of “rural” needs to be updated, and that currently eligible communities should be retained.
Rural families face unique difficulties in finding access to safe, affordable mortgage financing, and affordable rental options in short supply in rural America. Fully funding the Rural Housing Service’s programs is critical to the more than 17 million Americans living in rural communities. The current definition of “rural” is 40 years old and must be reformed in a thoughtful, reasoned way, taking into consideration the rural characteristics of local communities.
Over the past several years many community have been threatened by losing access to rural programs. Current law relies on a 40 year old definition of "rural" for determining eligibility for these programs of the Rural Housing Service (RHS). While Congress passed NAR-supported language in the FARM bill that extends existing eligibility through the 2020 census, some states are using their authority to re-designate communities and make them ineligible. This is due largely to the significant budget cuts RHS program have experienced over the last several years. Staff at local U.S. Department of Agriculture (USDA) offices has been cut dramatically, and RHS programs require significant staff oversight and review. NAR sent a letter to RHS urging them to make this process consistent and transparent.
On July 29, 2016, President Obama signed into law H.R.3700, the "Housing Opportunity Through Modernization Act," which provides permanent authority for direct endorsement for approved lenders to approve Rural Housing Service loans. This Direct Endorsement approach is used by the FHA and VA mortgage programs, and will create great efficiencies for USDA and for homebuyers. NAR worked closely with Congress on this legislation, which passed the House and Senate unanimously.
Federal Financing and Housing Policy Committee