Friday, September 5, 2014

USDA Rural Loan to Increase Fee

The annual fee that is charged by the USDA is set to increase "on October 1, 2014. The annual fee for both purchase and refinance loans will increase from .4% to .5%.  This change is required to maintain a neutral cost of the program" according to the  national RD office and has been in effect since October 1, 2011. This is the second increase to this fee, which was effective October 1, 2012. 

The upfront fee charged remains the same at 2% and may be added to the initial loan amount.

Additionally USDA RD offices suggest that...  "Lenders should communicate with Rural Development (RD) State Offices to understand current processing timeframes and determine which annual fee structure should be utilized..." Many RD State Offices are currently working through a backlog of guaranteed applications and lenders will need to begin processing loans using the .5% annual fee when it is estimated that RD will be unable to issue a conditional commitment prior to the close of business on September 30, 2014." ...by backlog they mean 35 business days, at least here in Oregon due to budget cuts and staff reductions. 

The compounding effects of the upcoming changes and the current underwriting turn-times are astronomical between the impending boundary changes, aging documents, increased debt to income ratios due to the increasing fees, and re-disclosure / compliance requirements. We might see some serious fallout if all parties aren't on their toes. Hopefully we will see some relief to that "backlog" sooner rather than later and we see the boundary changes delayed albeit again and/or temporary.

To apply for this or any other loan program contact me today!

Additional Resources: