USDA slashing mortgage fees
by: Ben Lane
Borrowers who use the U.S. Department of Agriculture’s Rural Housing Service to get a mortgage could soon pay significantly less for their loan, as the USDA announced that it is about to cut its loan fees for lenders who use the USDA’s Single Family Housing Loan Guarantee Program.
In an announcement sent to lenders this week, the USDA said that it plans to cut the fees it charges lenders both its upfront guarantee fee and its annual fee beginning on Oct. 1, 2016, the first day of fiscal year 2017.
According to the announcement, the USDA is set to cut its upfront guarantee fee from 2.75% of the loan-at-close amount to 1%. Additionally, the USDA is cutting its annual fee from reduced from 0.45% of the unpaid principal loan balance to 0.35%.
While these are the fees that the USDA charges lenders, these fees are often passed onto the borrowers, meaning borrowers could see loan savings beginning very soon.
So, what’s the reason for the cut? Better borrower performance, according to a USDA official.
According to the official, the USDA is able to cuts its the upfront and annual fees because borrower delinquency and foreclosure rates have reached “historic lows” since the beginning of the housing crisis.
Additionally, the official said that successful partnerships between the USDA and the lenders who participate in its loan programs have resulted in “very strong” performance within this program.
“When our borrowers succeed, the program succeeds,” USDA Rural Housing Service Administrator Tony Hernandez said in a statement provided to HousingWire. “Excellent overall performance in our Single Family Housing Guaranteed Loan Program means we can charge less for the life-changing opportunity to own a home.”