Are You One of the 19 States? USDA Refi Pilot Program!

Good news. If you currently have a USDA loan, call me about the new refinance program.

•  No credit report,
•  no appraisal,
•  no property inspections,
•  no income verification.
• Last 12 months mortgage payments must be made on time.
• Interest rate must be 1% below current rate borrowers are paying now

With the issuance of AN4615 on February 1, 2012. USDA Rural Development announced a new refinance pilot program  designed to help existing Section 502 borrowers, for both the 502 direct and 502 guaranteed loans, to refinance their homes with greater speed and ease. I like what RD is trying to accomplish under this new refinance pilot initiative but I wish it was available in all states, not just the 19 selected. You can bet that many states outside of this select group and those distressed homeowners living in them feel they are just as deserving.

Only 19 States Allowed in USDA Pilot Refinance Program  – Additional States are not eligible at this time.

• Alabama,
• Arizona,
• California,
• Florida,
• Georgia,
•  Illinois,
• Indiana,
• Kentucky,
• Michigan,
• Mississippi,
• Nevada,
• New Jersey,
• New Mexico,
•  North      Carolina,
• Ohio,
• Oregon,
•  Rhode Island,
• South Carolina,  
• Tennessee.

Eligible Borrowers: Current Section 502 Direct or Guaranteed Loan borrowers must:

•  Meet current income eligibility requirements (Comment: While applicants for the program must still meet the income eligibility criteria, repayment income is technically not a factor in that an USDA RD grants an automatic ratio waiver)
• Reside in an eligible rural area or an area that was eligible at the time of the original loan closing (Comment: In other words, even if the area where the property is located is no longer eligible you can still refinance under this program); and
• A Rural Refinance Pilot loan may only include the principal balance of the loan plus a portion of or the full upfront guarantee fee. The applicable upfront refinance guarantee fee is 1.5 percent. No cash out is permitted to the borrower. Accrued interest, closing costs, lender fees, and late fees are not eligible to be part of the refinance loan. (Comment: This means that only the principal balance of the loan may be refinanced with only the 1.5% guarantee fee added to the loan amount. All other costs associated with loan must be either paid for by lender premium pricing or the borrower. In this case, I foresee many lenders pricing the loan in such a way as to allow them to pick up much of the borrowers closing costs. For the 502 direct program borrowers any subsidy recapture cannot be included in the refinance loan. RD however could subordinate the subsidy recapture amount)
• Rural Refinance Pilot loans must be manually underwritten. They cannot be processed through the Guaranteed Underwriting System.

Really detailed information can be found www.MortgageCurrentcy.com (Trial subscription $1 for 7 days)

If you are located in one of the 19 states, go through your database.  This could be easier than HARP–especially if they “fit” the 1% rule and 12-month, on time payment requirement.  Karen Deis, Publisher.