Congressman Ruben Hinojosa Votes To Save The USDA's Section 502 Guaranteed Rural Housing Loan Program

Press Release

Today, U.S. Rep. Rubén Hinojosa (TX-15) announced the House Committee on Financial Services passed by voice vote 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, and Congressman Rubén Hinojosa, member of the Committee on Financial Services and Co-Founder and Chairman of the Congressional Rural Housing Caucus. This action clears the way for the U.S. House of Representatives to suspend the Rules and pass H.R. 5017 as early as next week.

The United States Department of Agriculture's (USDA's) Rural Housing Service (RHS) has announced that existing Section 502 guaranteed program commitment authority will be exhausted by the end of April. These loans are funded by private lenders, and insured by the RHS.

"As private mortgage markets have dried up, many rural families will be left out in the cold without these guaranteed loans", said Rep. Hinojosa. "Increasing the commitment authority will assist rural families, local housing markets, create jobs and generate new tax revenues".

H.R. 5017 would address this problem by eliminating the annual appropriations and increasing the percentage the program self funded, enabling families living in rural communities to continue to access these much needed loan guarantees.

USDA's Section 502 guaranteed is one of several sources of financing for rural homebuyers. It guarantees loans to applicants who have incomes no higher than 115 percent of the median income for the area. Section 502 Guaranteed loans can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

"Affordable rural housing is needed now more than ever as job losses and home foreclosures reduce the already inadequate housing options for rural Americans", said Rep. Hinojosa. "The serious economic downturn and the demand for this program have nearly exhausted its funding despite a nearly three-fold increase in its loan authority since Fiscal Year 2006".

USDA anticipates that the Section 502 Single-Family Guaranteed Loan Program will run out of commitment authority by the end of April 2010 and subsequently will cease to operate.

"Congressional action is needed to ensure the program continues to help build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities", said Hinojosa.

H.R. 5017 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.

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