The Mortgage Market’s Best Kept Secret

There is one growing sector of the housing market that often flies under radar of industry attention: the rural housing market. But it's definitely making some noise now.

According to CoreLogic's Faith Schwartz, the rural housing market is often an afterthought in the industry and does get the respect or attention it deserves.

Schwartz noted that the rural housing market should receive more attention for two reasons:

1. It serves as a laboratory for cutting edge affordable housing techniques.
2. It benefits a huge swath of the country: about 80 percent of all land area and about 20 percent of the country’s population.

Both the U.S. Department of Agriculture and HUD have products packaged into Ginnie Mae’s Rural Housing Service Section 502 direct and guaranteed mortgage, and the HUD Section 184 mortgage program targeted to American Indians, Schwartz reported. These programs made up about four percent of the $436 billion in Ginnie Mae securities issued last year or about $17 billion to fund rural housing.

HUD 184 has guaranteed some $5 billion through more than 25,000 loans in single family mortgages for Indians, most of them on or adjacent to their rural reservation since starting to guarantee loans in 1995, the report said.

In March, the Consumer Financial Protection Bureau’s (CFPB) announced a new ruling that will qualify for small, rural crediting provisions.

According to the CFPB, the Bureau has officially moved to implement Congress’ recent HELP Act, which stands for Helping Expand Lending Practices in Rural Communities. The act expands the guidelines for what “small creditors” are and will allow more lenders to take advantage of special lending provisions on CFPB mortgage rules set forth in January 2014.

Since the initial implementation of these rules, the CFPB has made several moves to expand the definitions of “small creditor” and “rural area,” but before the HELP Act, smaller lenders were only eligible for special provisions if more than half its loans were in rural or underserved areas.

CFPB Director Richard Cordray explains: “The Consumer Bureau today has acted to implement the recent law that extends to more small creditors the specific provisions for operating in rural or underserved areas. This rule provides broader eligibility for lenders serving in those areas to originate balloon-payment qualified and a high-cost mortgages.”

Fannie Mae and Freddie Mac may soon be made to offer mortgages for homes in 'underserved markets.'

A new rule, introduced in December 2015, requires the Federal Housing Finance Agency (FHFA) by federal law to issue a regulation to implement the Duty to Serve requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act (HERA) of 2008 among both GSEs.

According to a press release from the FHFA, the proposed regulation will require the GSEs to serve three underserved markets including manufactured housing, affordable housing preservation, and rural markets.

"The proposed rule would require the Enterprises to adopt plans to improve the distribution and availability of mortgage financing in a safe and sound manner for residential properties that serve very low-, low-, and moderate-income families in the three specified underserved markets," the FHFA stated in the release.

Schwartz concluded, "So even though you don’t hear about rural housing all that often that doesn’t mean that there isn’t a lot happening…and a lot of good being done."