USDA program may help rural homeowners

story by Ryan Saylor

Some residents in Arkansas struggling to make their mortgage payments may be able to receive help from the United States Department of Agriculture thanks to the expansion of a mortgage refinance program announced Thursday (Jan. 31).

According to a press release from U.S. Sen. Mark Pryor, D-Little Rock, the USDA's Single Family Guaranteed Rural Refinance Program will allow homeowners to renegotiate mortgages with lenders for more favorable interest rates, which could provide a lower monthly mortgage payment.

The USDA laid out the following terms of the program, which it said could lower interest rates for some borrowers below 4%:
• Homeowners must be current on payments during the previous 12 months;
• No new appraisals, property inspections or credit reports will be required, regardless of LTV (loan-to-value);
• Loans will be for a 30-year, fixed rate (at least 100 basis lower than borrower's current rate);
• Borrowers cannot take cash out, they can only refinance the current balance;
• A guaranteed fee of 2% can be rolled into the loan; and,
• The program is only for borrowers who already have a USDA Rural Development 502 direct or guaranteed loan.

Bill Thomas, a loan officer with BancorpSouth, said individuals with a USDA Rural Development loan interested in buying a new home through the program must reside outside of the city limits of Fort Smith, Central City and Barling. Refinancing of an existing mortgage within city limits is allowed if it meets certain criteria.

He cautioned borrowers to weigh whether or not the loan would be financially beneficial.

"They can get a cheaper payment," he said. "But the downside to it, if they have been in their home four or five years, it may stretch it out another 30 years from this point."

Thomas said even though the payment terms would be longer, a lower interest rate on a loan could provide customers with a monthly reduction in payment by nearly $200, on average.

He added that customers would need to reside in the refinanced residence for at least five years in order to come out ahead financially.

"You look at the closing costs, it will take about five years to recoup their money," he said. "You have to ask yourself, 'How long do you plan on staying here? Is it really worth it? Are you going to get your money back?'"

Potential applicants must also meet certain income eligibility, according to Thomas.

According to the USDA Rural Development website, the adjusted median household income for Fort Smith-area families of four seeking to take part in the program was $48,400. In northwest Arkansas, that number was $58,200.

Pryor praised the program's ability to help lower-income households stay in their homes and said he hoped residents would take part in the program.


"I'm pleased the USDA has decided to include our state in this program, and I hope eligible Arkansans will take advantage of this money-saving opportunity," he said.

Thomas said residents interested in taking part in the program should contact their local mortgage lender to see if they participate in the program.

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How to really help Arkansas afford their mortgages vs. Big River

Were the State to establish a $50 million revolving loan fund for homeowner energy efficiency projects, the energy savings would enable more homeowners to afford their mortgages. It will also create many jobs in all parts of the state. Unfortunately, the Big River Steel project that sucks up $125+ million in the State of Arkansas bonding capacity will likely "crowd out" our ability to do smart growth programs like this. That's too bad since the loan fund for our residents would be "the gift that keeps on giving" to them and to small contractors who would retrofit their homes for energy efficiency, safety, durability and comfort. Alas.

Jim Shankle
Johnson, Arkansas

Hand up instead of a hand out

I would rather spend the money creating a steel mill with a long life span that will create jobs for many years. A 50 million dollar hand out program will be used up in a couple of years at best. We as a nation have made it to easy to sit at home, procreate and draw a check. Lets create some jobs and get people employed.

A loan is not a handout.

Replay that mantra for me, please? A handout to a big corporate steel mill which will probably have trouble competing globally might not have even the half-life of what you prognosticate. You are assuming that the recipients of the loans for the other uses are deadbeats. Somebody owns the houses which are taxed, somebody works the jobs to fix the houses. Everybody benefits from energy efficiency retrofits as a matter of national security. Your thinking is grounded in the "iron age" so to speak placing all eggs in one basket.