The housing market in rural communities may be about to take a serious hit. A major federal program that provides housing loans to rural home buyers is about to run out of money. "Since last fall, the loans from the Department of Agriculture have fueled much of the real-estate business in some parts of the country," Steve Karnowski of The Associated Press reports. "Real estate agents are pleading with Congress to find a way to keep the money flowing until more funding becomes available later in the year."
The program's budget was doubled by stimulus money this year, Karnowski reports, but may be undone by its immense popularity. The program, run through USDA's Rural Development office, is intended to keep people from moving out of rural areas. It provides 30-year fixed rate mortgages at market rates, does not require a down payment and has no monthly mortgage insurance premiums. To be eligible, home buyers must live in a community with fewer than 20,000 people.
"As private mortgage markets have dried up, many rural families will be left out in the cold without these guaranteed loans," National Association of Realtors President Vicki Cox Golder wrote to leaders of the House and Senate appropriations committees. While the program is aimed at low- to moderate-income buyers, its default and foreclosure rates are lower than Federal Housing Administration loans, Karnowski reports. If an alternative funding solution isn't found soon, USDA may be left with no choice but to shelve the program for five months until next year's funding kicks in. (Read more)
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