USDA announced on March 10th that they expect to deplete their funding by the end of April. This tipically happens toward the end of each fiscal year while they wait for the next years funding. It is not a big deal in that situation because they issue "conditional commitments" subject to appropriation of funds. The only impact is a delay of the Loan Note Guarantee.
This depletion of funds in April is a big deal and will have a major impact on the mortgage industry. To put it simply, there are no more funds and USDA will not be issuing a "conditional commitment"!
Think about why this will have such a large impact. This is the only true 100% mortgage on the market excluding the VA loan. There are many excellent buyers in the market that want to purchase a home but have little savings which is a reflection of todays economy.
There is a domino effect here. Without this surge of qualified buyers the continuing surge of forclosures and declined sales in new construction will cause the housing market, which drives our economy, to take a nose dive fast.
What about the home buyer tax credit?? The buyer must be in a contract by April 30th and those loans must close by July 1st, 2010. That only allows 60 days to close the loan. I wonder how many people will lose out on this tax credit?
This is the Official Statement released by USDA SFH Loan Guarantee Division on March 10th, 2010:
Notice of FundingJP Morgan Chase formed a coaliton of lenders that have already met with the Under Secretary and folks on Capitol Hill. The Under Secretary and Capitol Hill people were "surprised" that this happened. Hey, I am SHOCKED that they were surprised! Or maybe not, ... it has long been my opinion based on their decisions that they don't have a clue about the mortgage industry, the banking industry, or the needs of the American people.
This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.
Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.” This is because it is not certain when additional funding will be available.
Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita. Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.
I have heard that some temporary funding may come by the reprogramming of some ARRA funds or from funding that was allocated to the USDA Direct Home Loan Program which is intended for people with low to very low incomes. The USDA National Office has a phone number for inquiries, (202) 720-1452, and they also recommend that you contact your Congressmen with your questions.
Please, contact your Congressmen!