U.S. Department of Agriculture announces Rural Refinance Pilot Program

Rural homeowners in Nevada who have a mortgage held or guaranteed by U.S. Department of Agriculture Rural Development may want to consider the new Rural Refinance Pilot Program, which was announced this month.

This program is designed to assist responsible homeowners who may be upside down on their mortgage, but are making their payments as agreed. The program is part of the package announced by President Barack Obama during his State of the Union speech on Jan. 31.

The initiative targets existing USDA borrowers who have paid their mortgage on time for the past 12 months and want to take advantage of the low interest rates that are currently available.

The Single Family Housing Guaranteed Rural Refinance Pilot Program is operating in the 19 states, including Nevada, that have been hardest hit by the downturn in the housing market.

These are home loans that are made directly by USDA Rural Development, or which are held by private lenders, but are guaranteed by USDA. No taxpayer funds are used to support the program.

"This program rewards responsible homeownership and is great for families and the economy," said USDA Rural Development State Director Sarah Adler. "These are low- to moderate-income homeowners whose home loans have already been guaranteed by the government. Refinancing these mortgages at a lower interest rate reduces the risk to the government, helps the families and provides an infusion of funds into the economy."

One recent refinance in Minden shows the cost savings that can occur. A 30- year loan for $166,326 was refinanced, dropping the homebuyer's payment from $944 to $806, saving nearly $50,000 over the life of the loan.

"That cost savings of $138 a month makes a big difference for a family on a budget," Adler said.

There are 235,000 homeowners nationwide who are eligible for the program, with nearly 2,000 borrowers in Nevada.

To be eligible, existing USDA RD borrowers must have made their mortgage payments on time for 12 consecutive months. The guaranteed loan program does not require borrowers to obtain new credit reports, appraisals or property inspections, however, lender requirements may vary. Interest rates must be below the original interest rates, with a 30-year term. No cash out is permitted to the borrower.

Adler said the delinquency rate in the Nevada program, at 8.91 percent, is the second to the lowest in the nation, after Rhode Island.

"Delinquency is never good, but in this economy, and with Nevada leading the country in foreclosures, we're proud that our default rate is so low," Adler said.

The program expands upon USDA's ongoing help for rural homeowners. In 2010, USDA Rural Development established an aggressive modification policy for guaranteed loans designed to assist homeowners who are delinquent on their mortgages. By working with their lender, these homeowners may be able to lower their monthly payments through a loan modification that reamortizes their payments over a longer term, lowers their interest rate, or both.

Homeowners should contact the state office of USDA Rural Development at 775-887-1222 for more information.