WASHINGTON – Oct. 12, 2016 – When President Obama signed FHA condo financing legislation into law this summer, the news focus was on lower owner-occupancy requirements and other changes that would make it easier for borrowers to use federally insured loans for condo purchases.
But the law, which was backed by the National Association of Realtors® (NAR), also contained a provision to speed processing of Sec. 502 rural home loans by allowing the Rural Housing Service (RHS) to insure home loans without first requiring lenders to submit each loan to the agency for approval.
NAR says it supported this new direct-endorsement process for rural home loans because it promises to get loans into the hands of borrowers faster. It’s also something that has a strong track record: FHA has successfully allowed lenders to originate loans under the direct endorsement process for years.
But don’t expect the Rural Housing Service change to happen anytime soon.
Joaquin Tremols, director of single-family loans at the agency, said there’s a plan to implement the new process but it could take several months before it’s cleared. Tremol’s comments were made at a recent Ginnie Mae summit that was reported by National Mortgage News. Ginnie Mae is the federal agency that backs securities collateralized by FHA and RHS home loans.
Once the plan is cleared, there will probably be an additional delay as the agency secures funds to implement computer and other system changes. The agency says it will need as much as $4.5 million to get everything done, and right now it doesn’t have the money. As a result, it’s unlikely direct endorsement will be in place before 2018 – and it might even be a year or more beyond that, say NAR regulatory analysts.
Bottom line: Real estate secured an important victory getting direct endorsement for federally backed rural housing loans enacted into law, but the change will likely be several years in the making. So, for the near future, all Sec. 502 RHS loans must get upfront review in Washington before they can be approved.
Source: Robert Freedman, Realtor® Magazine
© 2016 Florida Realtors®
Source: Florida Realtors Feed