USDA loans go unused
More than $190.6 million is available to Utah through the American Recovery and Reinvestment Act for loans and food assistance, such as school lunch programs and food stamps. If funds through the U.S. Department of Agriculture are spent, even more economic stimulus money could flow into Utah.
But at this point, of the more than $1 billion earmarked for all stimulus programs in Utah, only $530 million has been spent. That could soon change.
Twenty-five counties are eligible for USDA loans. Although funds are restricted to areas with lower population densities, there are pockets of eligibility along the populous Wasatch Front in Salt Lake, Utah, Davis, Box Elder and Weber counties, just outside the Interstate 15 corridor.
Yet the loan programs aren't well known because the agency has no money for advertising -- and few think of the USDA as a bank. Rural residents often find out about programs through word of mouth or when a state or federal agency refers them to the USDA Rural Development office. But at this point, no banks or borrowers have tapped into the $12.3 million in stimulus money for business loans. The recovery funds are in addition to money already set aside for rural lending programs.
"The Recovery Act has created some great opportunities," said Perry Mathews, state USDA rural business program director. "Perhaps because of concerns over the economy, there seems to be a hesitancy to borrow."
The stimulus money has reduced fees for a business loan from 2 percent to 1 percent. In addition, annual renewal fees have been waived for the life of the loan, which can range from seven years for working capital to 15 years for equipment purchases and up to 30 years for real estate.
Uintah County Commissioner Michael Mckee, for one, said last week he wasn't aware of how to tap into the stimulus money.
"We've been energetic in our efforts to find money for small businesses," he said, noting that they are the driving force behind rural economies. "Maybe it's our fault, but I certainly will be contacting the USDA office very, very soon."
At the state level, Rural Development Director Dave Conine said that beginning in January his office will make a stronger effort by conducting outreach programs to acquaint rural counties with grants and loans offered through the USDA.
The timing could be beneficial for many borrowers.
"With the passage of the Recovery Act, we have plenty of money to lend," said state housing program director Janice Kocher. "This is our year to make a difference in rural Utah. We may not have this opportunity again."
The USDA offers guaranteed home loans for moderate-income families. Cash-strapped consumers with otherwise good credit records may qualify for no-money-down, 30-year loans through approved lenders. The USDA also allows for property, construction and closing costs to be folded into the life of the mortgage.
And unlike so-called subprime loans, which were made to risky borrowers and were blamed for playing a role in the collapse of the financial system, the USDA's guaranteed loans get paid off. Last year, only two homeowners defaulted on mortgages out of the 1,800 loans made in Utah. Federal officials attribute the success rate to uncomplicated packages and the absence of balloon payments, as well as borrowers having a clear understanding of their financial responsibilities.
Some Utahns have gotten the word about the loans.
"We couldn't have afforded our home without a rural loan," said JoAnna Harris, 24, who moved into a 2,000-square-foot house in Tooele County's Stansbury Park in September.
Harris, 24, learned about USDA guaranteed mortgages after a family member qualified for a similar loan. Harris and husband Nathan researched other lenders, but only the rural loan did not require a down payment. Their two-story, brick-and-stucco house, with its $225,000 mortgage, is the couple's first home. Although they live in a rural area, they're a quick 30-minute drive to downtown Salt Lake City, where he works as a chef. She works at home placing student teachers, in addition to tending their 6-month-old baby.
The USDA also offers subsidized home loans for families with low incomes (up to 80 percent below the median income in their communities). The interest rate is 4.875 percent, although that dips as low as 1 percent, depending on income. Loans are from 33 to 38 years, and borrowers will never pay more than 30 percent of their gross incomes for interest and principal.
Subsidized loans also have a two-year moratorium on mortgage payments if the borrower loses a job or develops a medical condition.
"There are no similar loans in the private sector where payments can be suspended," said Gary Nielson, past president of the Utah Mortgage Lenders Association. "If a borrower gets behind, it's possible to get a modification on the loan, but they must make some kind of payment."
Rural Development also has formed partnerships with nonprofit housing groups to give individuals and families a chance to reap financial benefits by constructing up to 65 percent of their own homes. Borrowers must be willing to work 35 hours a week under the supervision of a licensed contractor.
Starting in January, Zola Stubbs, 49, will begin working on her home in Eagle Mountain. Stubbs, her two sons, ages 16 and 20, and three other families will help build each other's homes. The families have been instructed in framing and will attend other training sessions as the work progresses.
The building project is expected to be completed in June, and no one moves in until all four houses are finished. This will be Stubbs' first home.
"We've had some rough times but we're strong and we're willing to work hard," said Stubbs, who was homeless in 1999 and now works in a manufacturing plant. "It's still hard to believe we'll have our own home."
For more information, visit http://www.rurdev.usda.gov/ut or contact:
State housing program director » Janice Kocher, e-mail Janice.Kocher@ut.usda.gov.
State business program director » Perry Mathews, e-mail Perry.Mathews@ut.usda.gov.
Salt Lake, Utah, Wasatch, Summit and Tooele
302 E. 1860 South, Provo.
801-377-5580, ext. 12, 13, 23 or 33
Box Elder, Cache, Rich, Weber, Davis and Morgan counties
USDA Service Center
1860 N. 100 East, Logan
435-753-5480, ext. 14, 30, 33 or 35
Uintah, Daggett and Duchesne counties
USDA Service Center
80 N. 500 West, Suite 2, Vernal.
435-789-2100, ext. 20 or 23
Sanpete, Millard and Juab counties
50 S. Main St., Suite 6, Manti
435-835-4111, ext. 11 or 19
Sevier, Wayne and Piute counties
USDA Service Center
340 N. 600 East, Richfield
435-896-8250, ext. 120, 126 or 110
Iron, Beaver, Garfield, Washington, Kane counties
2390 W. Highway 56, Suite 13, Cedar City.
435-586-7274, ext. 11, 12 or 24
San Juan, Grand, Emery and Carbon counties
Young Building, 32 S. 100 East
P.O. Box 639, Monticello
435-587-2473, ext. 10 or 13