KANJORSKI BILL PRESERVING AFFORDABLE MORTGAGES IN AMERICA’S HEARTLAND PASSES IN COMMITTEE
Today, the House Financial Services Committee unanimously passed H.R. 5017, the Rural Housing Preservation and Stabilization Act of 2010, introduced by Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. This action clears the bill for consideration by the U.S. House of Representatives, which is expected to take up the bill as early as next week. The bill ensures the continued access of rural homebuyers to affordable mortgages through the U.S. Department of Agriculture’s (USDA) loan guarantee program. The financial crisis has spiked consumer interest in the program, tripling the number of loans annually made since 2006. Because demand continues to grow, the program will exhaust its federal funding within days. H.R. 5017 would, at no cost to the taxpayers, solve this problem by making the program self funded, enabling families living in rural communities to continue to access these much needed loan guarantees.
“Since its creation in 1987, USDA’s affordable rural home loan guarantee program has helped hundreds of thousands of families to realize the American dream of homeownership, including many in Northeastern Pennsylvania,” said Chairman Kanjorski. “As a result of the unprecedented demand, the program is now unfortunately running out of money. At no cost to taxpayers, my bill will preserve the access of millions of families living in America’s heartland to needed USDA loan guarantees, so that they can continue to buy homes with affordable mortgages. Without action, too many families in rural America will have no options for getting home loans. We cannot allow that to happen.”
“As a result of this program, I was able to purchase my first home which I have wanted all my life," said Virgie Spruiell from Bushkill, Pennsylvania. “I enjoy it every day and it is a blessing. I greatly appreciate Chairman Kanjorski's efforts to enable the program to continue so that other people can access these guaranteed home loans just as I did. It has had helped me tremendously.”
Chairman Kanjorski’s legislation will correct the Section 502 Single Family Housing Guaranteed Loan Program funding shortfall by enabling the program to pay for itself, rather than relying on federal funding. In order to pay for the program, lenders will pay up to a 4 percent fee on new home mortgages. As a result of these changes, financing of the program will move from a combination of government funding and industry fees to a self-sustaining initiative.
The USDA’s Rural Housing Service manages the Section 502 program, which provides a vital source of mortgage credit for people living in rural communities. Low- and moderate-income individuals and families in rural communities often have fewer mortgage credit options than those households in urban areas. The program aims to fill that void and lower the costs of homeownership by giving rural areas access to a home loan guarantee program. These guarantees decrease the exposure of home lenders to defaults so that they will underwrite more mortgages. In 2009, loans made under the program averaged $112,000. To qualify for the program, borrowers must have good credit and reliable incomes to sustain homeownership.