Removing Barriers Blog

CUNA Input Cited in GAO Report on RHS and FHA Rural Lending Programs
Posted November 01, 2016 by CUNA Advocacy

The U.S. Government Accountability Office (GAO) released its report comparing the single-family home purchase loans guaranteed by the Rural Housing Service (RHS) and the Federal Housing Administration (FHA) for fiscal years 2010–2014 and identified significant overlap and some differences in the borrowers served.  CUNA was interviewed and provided input into the study.  Although the report made no new recommendations for the programs, it maintained that the RHS and FHA should evaluate and report on opportunities to consolidate their similar housing programs. 

Among its findings, GAO found that within statutorily defined rural areas (RHS-eligible areas):

  • Both agencies served large numbers of rural borrowers, but FHA served over 35 percent more than RHS, while RHS reached a greater number of borrowers in the more rural parts of RHS-eligible areas.

  • Most of the borrowers served by each agency had annual incomes below $60,000. But consistent with RHS's statutory income limits, the median borrower income for RHS ($44,000) was well below that for FHA ($57,000).

  • RHS and FHA borrowers had similar credit scores (around 685 at the median) and ratios of housing expenses to monthly gross income (23–24 percent at the median).

  • Borrowers in both programs had high loan-to-value (LTV) ratios (loan amount divided by home value). But RHS's no-down-payment requirement and FHA's statutorily required 3.5 percent down payment resulted in higher LTV ratios for RHS than for FHA (medians of 101 and 96.5 percent, respectively).

  • Significant portions of RHS and FHA borrowers could have met the criteria of the other program. For example, at least 36 percent of RHS borrowers could have met FHA's criteria, including the 3.5 percent minimum down payment.

A copy of the report can be viewed here.