What is the status of USDA funds in CA?

Here is the legislative update on H.R.5017: Rural Housing Preservation and Stabilization Act of 2010....

Latest Major Action: 4/28/2010 Referred to Senate committee.
Status: Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs. 

The new legislation essentially removes the 1.5% government subsidy and puts the entire 3.5% guarantee fee on the shoulders of the borrower, but some politicians think the guarantee fee should be larger.  As a result the bill is still stuck in committee, the USDA is not issuing new loan approvals,  and lenders are not taking new loan applications.

There are several issues here...

1. First time home buyers fueled the recent uptick in housing demand. With it now expired, do we really want to remove a program that is intended to attract the very same potential homebuyers who supported the real estate and mortgage business over the past 12 months?
   
2. An increase in fees would wreak havoc on high cost calculations.
3. While the likelihood of this bill passing remains very high, there is good reason for the industry to be frantic about the timing of its passage: CONGRESS GOES ON MEMORIAL DAY VACATION FROM MAY 31 TO JUNE 4. If a the legislation does not pass before then, we would have to wait at least another week for the program to reopen. This would be critical time wasted for many prospective home buyers who need to utilize Section 502 funding and still take advantage of the tax credit.  Did you know that USDA loans are unwritten twice? Once by the investor and once by USDA. The Section 502 qualification process is not short! Wasting a week would surely push some USDA loan closings past the June 30 tax credit cut off date.

M - sorry to hear you got caught in this mess.  Lenders have known for quite some time now that USDA was likely to run out of money some time this spring. We've been receiving memos from USDA for months keeping us informed. 

Currently, a bill to provide additional funding has passed the U.S.House of Representatives and is pending action and various sources put this vote as occurring early next week. One thing to keep in mind – it's likely the 2% fee USDA used to charge is going to increase to 3.25%.

Regardless, make sure your loan is fully pre-approved with your lender so that you are ready to go when funding is available.  Most have stopped taking applications for USDA loans but there are still some that will process them.

Good  luck.