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Home Buyers Flock To Little-Known Loan Program

Tribune file photo by CHRIS URSO (2006)

The program applies to homes in sparsely populated areas.

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By KEVIN WIATROWSKI | The Tampa Tribune

Published: February 5, 2009

Updated: 02/06/2009 10:17 am

With tightened credit markets strangling the supply of home loans, a growing number of buyers in the Tampa Bay area have turned for help to an obscure program run by the U.S. Department of Agriculture.

The Rural Housing Service is a federal program aimed at helping people – most of them first-time buyers – get into homes. The program offers direct mortgages and loan guarantees of as much as 100 percent.

By contrast, many lenders that offered generous mortgages a few years ago now want buyers to come with hefty down payments and have stellar credit – something beyond many first-time buyers.

The loan guarantees have drawn hundreds more people than in years past. Prospective home buyers interested in taking part in the program can start by contacting their real estate agents.

The USDA became the guarantor of nearly $300 million in property across Florida in the 2008 fiscal year, which ended Sept. 30. That amount included $12.6 million in Hillsborough and Pasco counties – more than 12 times what the program backed in 2005 as the region's building boom gained speed.

The same program backed another $9 million in loans in Hillsborough and Pasco in the first quarter of the 2009 federal fiscal year, which began Oct. 1.

"People are being driven to the program," said Ralph Cumbee, Pasco regional president of First Community National Bank in Dade City. Cumbee also oversees operations in Hillsborough County.

Pinellas County was one of three Florida counties too urbanized to get assistance from the program, which was created to help develop rural areas. Broward and Monroe also failed to qualify for aid.

The Rural Housing Service's loan guarantees cover properties within specific geographic areas, defined largely by population density. In the Tampa Bay area, that means Pasco County, east of the Suncoast Parkway, and eastern Hillsborough, beyond Brandon and outside Plant City.

The program has been around for more than 40 years as part of a USDA program known as Farmer's Home, which offered an array of help to rural residents, from housing to farm support. The program focuses on the affordable end of the housing spectrum, including apartments and mobile homes, but it can be used to finance more expensive housing if the location and price are right, Cumbee said.

The sudden rush to the USDA program reflects both the demise of other housing assistance programs and a return to more conservative standards for deciding who gets a mortgage after the boom years of 2005 and 2006.

The USDA program wasn't so popular then.

"We really didn't need that program because if someone could fog a mirror, we'd give them a loan," Cumbee said. "That's not happening any more."

Polk County led the state in homebuyers benefiting from the USDA's help last year. The agency backed 181 loans there – nearly triple the number in 2007 – for a total of $17.5 million.

"Almost any deal that I put together now is the USDA program," said Lisa Kelly, a real estate agent in Polk County. She estimates that about half her business relies on the USDA guarantee to close the sale.

"What's selling in Polk County right now is the cheap properties," Kelly said. "Cheap properties draw first-time homebuyers."

It also helps to have a real estate agent or broker who knows where to go for financial help.

"The minute I take a listing, the first thing I do is plug it into the USDA Web site," Kelly said.

The USDA program also favors first-time buyers because it excludes borrowers who currently own a home, eliminating thousands of people who might otherwise use the program to move up in the market.

But the USDA can't put everyone in a house. Too much debt or too little income will kill any deal, Kelly said.

There's another hitch in the program: This time of year, it starts running out of money in Florida, Cumbee said.

"About the time you get fired up, you run out of money," he said.

When that happens, federal officials take a few weeks to shuffle funding from states with unspent funds to those that need more, said Cumbee, who expects the program to grow under the economic stimulus package making its way through Congress.

"I can definitely see this program getting more money," he said.

Reporter Kevin Wiatrowski can be reached at kwiatrowski@tampatrib.com or (813) 948-4201.

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