The USDA announced that both their upfront guarantee fee as well as their annual fee structure will see rate reductions in Fiscal Year 2017, which begins on October 1, 2016 and ends at the close of business on September 30, 2017.
For the USDA’s Single Family Housing Guaranteed Loan Program, the upfront guarantee fee will change from 2.75% to 1.0% of the loan amount. The annual fee will change from .50% to .35% of the average scheduled unpaid principal balance for the life of the loan. This announcement comes on the heels of another positive development relative to USDA loans.
In February 2016, the House overwhelmingly approved (by a vote of 427-0) a Bill that would authorize the USDA to use Direct Endorsement lenders to approve RHS-guaranteed single family loans.
Although there will a time delay in this legislation passing the Senate, being signed by the President and having USDA staff write up their policies and procedures, this is a step in the right direction for this loan program.
Looking at FHA’s experience with the Direct Endorsement program (which was first implemented in the mid-1980s) as well as the Lender Insurance (LI) program (which now accounts for approximately 75% of FHA’s single family loan originations) – the USDA will certainly benefit from delegating this underwriting authority to approved lenders.
The FHA now permits approved LI lenders to process, underwrite, close and insure FHA loan transactions – all without prior review by HUD staff. This process has enabled FHA to be able to continue to insure large volumes of loans at the same time as their staff resources have been declining.
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If your firm currently does not participate in USDA loan programs, it is a good time to look into becoming active in their loan programs as it appears that the USDA is both streamlining their procedures and reducing their fees. If interested, check out their website at www.rd.usda.gov .