With funding for a key rural housing program about to be exhausted, the U.S. House of Representatives on April 27 approved legislation to ensure that home buyers in rural areas have continued access to affordable mortgages through the U.S. Department of Agriculture (USDA) loan guarantee program.

NAHB is urging prompt action on a companion bill, S. 3622, that has been introduced in the Senate by Sen. Michael Bennet (D-Colo.)

The House bill — H.R. 5017, the Rural Housing Preservation and Stabilization Act of 2010 — would strengthen the USDA 502 loan guarantee program, which is a critical source of financing for rural home buyers.

The program guarantees loans to applicants who have incomes no higher than 115% of the median income for the area. The loans are funded by private lenders and can be used to build, buy, repair or renovate homes.

As a result of the current mortgage credit crisis, demand for the loans has spiked since 2006 and the number made annually has tripled. Without timely congressional action, the program could see its current federal funding depleted within days, according to the bill’s lead sponsor, Rep. Paul Kanjorski (D-Pa.)

“As a result of the unprecedented demand, the program is now unfortunately running out of money,” Kanjorski said. “Without action, too many families in rural America will have no options for getting home loans.”

The legislation will correct the funding shortfall by enabling the Section 502 Single Family Housing Guaranteed Loan program to pay for itself, rather than relying on federal funding.

Participating lenders would be required to increase their current 2% fee on new home mortgages to as high as 4%, which would make the program self-sustaining, at no cost to the American taxpayer, and provide families in rural communities with a vital source of mortgage credit.

Citing the importance of the USDA 502 loan program to providing homeownership opportunities in rural communities across the nation, NAHB designated a vote in support of H.R. 5017 as a “key vote.”

The House approved the legislation by a vote of 352 to 62.

To view the legislation, click here and type H.R. 5017 in the box at the center of the screen.

For more information, e-mail Scott Meyer at NAHB or call him at 800-368-5242 x8144.