RHS Administrator Hernandez: Changes to Program Make Refinancing RHS Loans Easier
Rural Housing Service Administrator Tony Hernandez said recent changes to the agency’s refinancing provisions will make it easier for borrowers to finance RHS loans and stay in their homes.
“We really want to communicate that we don’t want people to be trapped in these mortgages,” Hernandez told MBA NewsLink. “We want homeowners to build wealth and enjoy the freedom of owning a home. Refinancing is a very helpful step to stay in their home and build household wealth. The whole purpose of homeownership is to create wealth. We are trying to make sure homeowners succeed.”
The new provisions, published as part of a final rule that went into effect June 2, apply to mortgages issued through USDA and those where USDA has issued a loan note guarantee. Under the final rule, Homeowners current on their mortgages for the past 12 months will no longer be required to secure an appraisal, provide a credit report or undergo a debt-to-income calculation when they refinance for a 30-year term.
USDA began testing these changes in a 2012 a pilot program that was later expanded to include 34 states and Puerto Rico. Hernandez said to date, nearly 9,500 homeowners have refinanced their mortgages, with some borrowers saving as much as $600 a month. The average savings is nearly $150 per month.
“It’s a permanent program now,” Hernandez said. “We ran the pilot program for about a year, targeting to hard-to-reach borrowers. It grew to 35 states; now, it’s national.”
Hernandez said since 2009, USDA Rural Development has helped 1.1 million rural residents buy homes; invested $11 billion to start or expand 103,000 rural businesses; funded nearly 7,000 community facilities such as schools, public safety and health care facilities; financed 185,000 miles of electric transmission and distribution lines; and helped bring high-speed Internet access to nearly six million rural residents and businesses.
“We have about 141,000 new home borrowers last year,” Hernandez said. “We had 148,000 the year before that, and 1.1 million since 2009. “That’s why the lenders’ role is so important. We really depend on them to help us out.”
Hernandez said RHS regularly holds lender forums in which RHS outreach staff meet with lenders and non-profits; RHS has staff in 47 states He said he recently met with lenders face to face in Arkansas and West Virginia. “We don’t want to do this in Washington, D.C.; we want to be in the field, talking to lenders where they lend.”
Those discussions, Hernandez said, have resulted in other positive changes. For example, in December RHS implemented a one-note guarantee and one-time closing guidelines. “We want to help our lenders,” he said. You helped us do that. The second-biggest barrier to ho in rural America is housing stock. We have great community development efforts that promote homeownership and MBA is critical to educating members of Congress on these efforts.”
Matt Jones, regulatory assistant with the Mortgage Bankers Association, serves as manager of the MBA RHS Working Group, consisting of 15 RHS lender MBA members who meet twice a year via conference call with RHS. Jones said MBA has a “really good relationship” with RHS–“very workmanlike. Every conversation is a great one,” he said.
