Written By: Stacey Sprain, Op-Ed Writer
On May 11th, USDA announced that they would continue to issue Conditional Commitments for Guaranteed Rural Housing loans until even after 2010 appropriated funds has been exhausted. Their bulletin stated that such Conditional Commitments would be issued with a condition stating “subject to the availability of funds and Congressional authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans.”
However; on May 12th, USDA issued another bulletin to announce that they were retracting the prior bulletin they’d issued on May 11th and that they would be replacing that prior bulletin with an updated bulletin. To date, USDA has not communicated any additional details on a replacement bulletin. However, after tracking the path of this bill through Congress myself, I can explain why this occurred.
According to bill tracking on THOMAS, the following explains the path of this bill thus far:
1. The bill started out as H.R. 5017 with a proposed increase to Guarantee Fee to 3.5% AND an annual fee of .5%.
(1) UP-FRONT AND ANNUAL FEES- Paragraph (8) of section 502(h) of the Housing Act of 1949 (42 U.S.C. 1472(h)(8)) is amended to read as follows:
(8) GUARANTEE FEES- With respect to a guaranteed loan under this subsection, the Secretary may collect from the lender--
(A) at the time of issuance of the guarantee, a fee equal to not more than 3.5 percent of the principal obligation of the loan; and
(B) an annual fee during the term of the loan equal to not more than 0.5 percent of the outstanding principal balance of the loan.'.
2. It was revised and actually passed the House of Representatives and was handed off to the Senate with a proposed increase to Guarantee Fee of 4.0% with no annual fee.
(a) Up-front Fees- Paragraph (8) of section 502(h) of the Housing Act of 1949 (42 U.S.C. 1472(h)(8)) is amended to read as follows:
(8) GUARANTEE FEES- With respect to a guaranteed loan under this subsection, the Secretary may collect from the lender, at the time of issuance of the guarantee, a fee equal to not more than 4.0 percent of the principal obligation of the loan, as determined sufficient by the Secretary to cover the costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of loan guarantees under this subsection.'.
3. It’s been read twice in the Senate, was somewhere revised once again to 4.05% and is now referred to the Committee on Banking, Housing, and Urban Affairs.
(1) UP-FRONT FEES- Paragraph (8) of section 502(h) of the Housing Act of 1949 (42 U.S.C. 1472(h)(8)) is amended to read as follows:
(8) GUARANTEE FEES- With respect to a guaranteed loan under this subsection, the Secretary may collect from the lender, at the time of issuance of the guarantee, a fee equal to not more than 4.05 percent of the principal obligation of the loan, as determined sufficient by the Secretary to cover the costs (as such term is defined in section 502 of the Federal Credit Reform Act of 1990 (2 U.S.C. 661a)) of loan guarantees under this subsection.'.
Originally when USDA issued their bulletin, they were likely under the impression that the bill’s proposal to increase to Guarantee Fee wouldn’t get changed. However, they were wrong. With it having changed three times already, there is no possible way USDA can run the risk of issuing Conditional Commitments subject to particular Guarantee Fees because there’s no telling what the final Guarantee Fees will be when the bill finally passes. There is still potential for it to change yet again. For them to accept file and issue Commitments based on an estimated Guarantee Fee could potentially create a backlog of loan files that would require resubmission for corrections and the potential for loans to close with the wrong Guarantee Fees.
As of right now, USDA is not issuing any new Conditional Commitments unless they receive files from specific areas of the country who still have funding available under the existing guarantee fee structure. I’m told that areas of Louisiana still have leftover hurricane disaster funding available for properties in certain parishes. Loan files for properties in those areas are able to move through LA USDA offices to receive Conditional Commitments with the current GRH Guarantee Fees and proceed on to their closings. I have not heard of funding available in any other states as of right now.
The bill you’ll want to watch is Senate Bill S.3266- Rural Housing Preservation and Stabilization Act of 2010. You can read the text of this bill athttp://thomas.loc.gov/cgi-bin/query/z?c111:S.3266:. You can also track the bill on THOMAS at http://thomas.loc.gov/
which is what I’ve done here to provide you with the information stated herein.
If you originate or process USDA Guaranteed Rural Housing Loans, you will also want to be sure you are subscribed to their email list so that you will receive announcements directly from USDA as updates are communicated. To subscribe to the USDA GRH list or other available lists or to unsubscribe an old email address and subscribe a new email address, go to http://www.rdlist.sc.egov.usda.gov. Enter your email address and click on the appropriate e-mail list(s) to which you wish to subscribe and then click on the “Subscribe” button.
About The Author
Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution.
