Need help with Rural Dev. (FmHA) Subject 2 !! - Posted by Bryce

Posted by Bill H on July 15, 2003 at 15:42:01:


I tried one of those one time and backed out. I contacted, as you should immediately, the local USDA FmHA Rural Housing Rep and ask h/she what to do. There is often forgiveness of debt SO LONG AS THE ORIGINAL OWNER Lives there. That was the case and my good deal had about 35K in forgiven debt that was added and made it a lousy deal and I walked.

Good Luck,


Need help with Rural Dev. (FmHA) Subject 2 !! - Posted by Bryce

Posted by Bryce on July 15, 2003 at 14:49:57:

Thanks for reading my post. I have a house I’d like to take subject 2, but it has a Rural development direct loan on it. Not a lot of equity, but is in good neighborhood and will be a good Rent-2-Own.
3/2 1450 sq ft
8 mo old
$ 91,000 loan balance@ 3.0% 33 yrs
FMV 98,500
PITI 500.00
I thought if someone had experience with FmHA loans,you might suggest an avenue to avoid the interst rate change, which as I understand from the sellers will raise the payments to 745.00. Would still be doable, but if there is an ethical way to avoid it I’m all for it.
I did one just down the street, but it was an FHA loan.
I used land trust method. I am going to get the sellers loan papers and read them in their entirety, but would appreciate any experiences or suggestions.
Where would a person go to get the best information from the most knowledegable people ? (creonline)

Bryce (ID)

Re: Need help with Rural Dev. (FmHA) Subject 2 !! - Posted by B.L.Renfrow

Posted by B.L.Renfrow on July 22, 2003 at 02:25:16:

The subsidy issue is indeed real with these loans, and FmHA does, at least in my area, send an inspector every year to make sure the property is still occupied by the original borrower. To my knowledge, there’s no way to take one of these subject-to and keep the subsidy in place.

Brian (NY)

Re: Need help with Rural Dev. (FmHA) Subject 2 !! - Posted by Bryce (ID)

Posted by Bryce (ID) on July 15, 2003 at 23:22:55:

Thanks for the info on your experiences with FmHA.
I thought that the subsidy issue would be a major factor somewhere. As it appears it is a temporary subsidy unless you make it your permanent residence for
the life of your loan. Also it appears in the docs that they monitor you regularly and will keep trying to get you to refi as soon as it appears to them you are sufficiently qualified. Sellers called FmHA and gave permission to discuss with me, so I am going to go to them and tell them the situation with the sellers and see what they say. The sellers are going to walk away from the house in 2 weeks(headed out of state to Arizona). Figure I’ve got nothing to loose and I’ll probably learn something I may be able to use later. Also thought I might just try a short sale approach too, a reeeal short sale, you never know.
Thanks again,
Bryce (ID)

Re: Need help with Rural Dev. (FmHA) Subject 2 !! - Posted by SuperCat (IL, KY)

Posted by SuperCat (IL, KY) on July 15, 2003 at 21:14:05:

Be careful as they have some restrictive terms. We bought a house 3 years ago from someone that had it financed on the FmHA. The loan interest rate is subsidized by the government. They thought they only owed 35,000 on the loan, so they sold quickly to us through an agent for 52,000. The house appraised for 69,000. FmHA wants to be repaid for their subsidy so their payoff formula caluclates the appraisal value.
So what happened at closing is the sellers thought they would be leaving with a check for $15,000. They left with a check for fifteen dollars.
I haven’t ever done one subject to, but if you have that to worry about on a straight sale, there is no telling the problems with a subject to.