On November 6, 2014, the USDA announced that Rural Development will not accept new Single Family Housing Guaranteed loan applications from the close of business on November 21, 2014 through the start of business on December 1, 2014.
The primary reason cited for this suspension is to eliminate as much of the conditional commitment backlog nationwide as possible. Previously, the USDA had urged lenders to perform more substantive reviews of their loan packages prior to submitting them to Rural Development for processing since many submissions were found to be incomplete and/or containing miscalculations.
Some lenders had mistakenly believed that it would benefit them to submit an application quickly and without an in-depth review in order to get placed higher in the processing queue. This “strategy”, however, typically would backfire since USDA’s policy is to return incomplete packages back to the lender who would then have to obtain the missing documentation and re-submit the file for processing. The end result was a drain on USDA staff resources and even longer processing time frames.
In light of the November 6th announcement, it is recommended that lenders perform thorough reviews of their loan files currently in process and submit them to USDA as soon as possible on or after December 1, 2014. Any backlogged applications currently in the processing queue that are not processed by December 1st will be returned to lenders and will need to be underwritten a second time – this is because the USDA’s new 7 CFR 3555 regulation will then be in effect.
On the positive side – future turnaround times for USDA loan approvals are expected to be greatly improved because of this effort to reduce the current loan application backlog as well as the automation of the loan note guarantee process which coincides with the implementation of the 7 CFR 3555 regulations.
So – brighter days ahead are expected at the USDA with better processing times and more automation in the loan closing process. USDA loans already have some major advantages over other types of financing such as: low annual fees and less stringent underwriting criteria. A USDA loan is ideal for a 1st time home buyer. The only “catch” is that the subject property must be located in a designated rural area.
For more information on USDA loans go to their website at www.usda.gov – then click on the “Topics” tab, then “Rural and Community Development”, then “Single Family Housing Financing”.
Has your firm considered participating in USDA loan programs? If not – now seems like a great time to give this so serious consideration.