Mortgage Business

Why I Won’t Take a USDA Application

The USDA has recently been sending out notices that they are accepting USDA Rural Housing applications and issuing “conditional” commitments – conditional in that they are no good until Congress passes implementing legislation.  I get calls from borrowers, title attorneys, and real estate agents asking why I’m not taking applications?

Well, long story short, there two different pieces of legislation in congress at the moment. One allows for a 3.5% upfront fee (current fee is 2%) to make Rural Development (RD) self funding and the other would allocate $12B to allow RD to keep funding loans as usual. Not knowing which legislation is going to be final, we would either need to charge the borrower 3.5% upfront (which could be a compliance problem since that amount is not approved yet) or hope to collect it at the back-end (with new RESPA, HOPEA and HERA rules could be a problem) or pay it ourselves – losing money. On top of that if Congress does not pass either piece of legislation for some reason, USDA will not insure the loans made while we are waiting. Their “Conditional Commitments” are based on Congress passing some form of one the bills. And finally, we don’t know when (or if ) Congress will pass the legislation (it’s in line behind financial reform and possibly immigration) and if a borrower misses their first payment for any reason, again, USDA will not insure that loan and we will own it on our books.

So while RD is accepting applications – they are not bearing any of the risks (financial or reputational).  I hope this helps you understand what we are dealing with.  We are, however, putting all of the wheels in place to act quickly once there is clarity on direction from Congress.

Please contact me with any specific questions for loan in Delaware or Maryland and I’ll be glad to help.



Jeff Baxter – Prosperity Mortgage – Bethany & Rehoboth Beach, DE

My Website – Email:




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