USDA Rural Housing Service 502 Program Historically, the U.S. Department of Agriculture's Rural Housing Service (RHS) offered both direct and guaranteed homeownership loans.
The proposed federal budget for the 2009 Fiscal Year contains two plans regarding the RHS 502 Program. It proposes to eliminate their 502 Direct Single-Family Loan Program and raise the 502 program's guarantee fee in 2009 by 50 percent, from 2 percent to 3 percent. Also, the proposed budget provides no funding for the 502 direct single family housing loan program in 2009.
MBA is very concerned about the proposal to raise the RHS Section 502 guarantee fee from 2 percent to 3 percent. This increase being proposed would appear to significantly constrain eligibility for the Section 502 program. This change appears wholly inconsistent with the Administration's stated objective of creating a homeownership society among rural Americans. MBA understands that the intent of the increased fee is to generate additional revenue for the federal government. It is important, however, to consider that its practical effect may be to drive consumers into other loan programs or out of the housing market altogether. Thus, anticipated federal revenue may not materialize.
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