CHICAGO, Ill., October 23, 2006--Russell T. Davis, Administrator for Housing and Community Facilities Programs, USDA Rural Development, addressed the attendees of the Mortgage Bankers Association of America's annual convention regarding the key benefits of his agency's 502 Guaranteed loan program. Guaranteed loans empower lenders to offer more flexible and affordable mortgage terms to borrowers who purchase homes in eligible communities because the government is backing - or guaranteeing - the loans.

     Davis said, "The guaranteed program is truly an affordable option for buyers who wish to purchase homes in rural areas. We have stepped up our outreach to lenders and real estate professionals who serve rural citizens to let them know that with our assistance they can help more of their neighbors realize their dreams of homeownership. The higher the homeownership rate, the better the community's economic climate."

     Section 502 Guaranteed loans promote homeownership throughout rural America by reducing risk to lenders. Guaranteed loans may be for 100 percent of the appraised value of a home with no money down, attractive fixed interest rates, and no mortgage insurance. There is a two percent guarantee fee charged by Rural Development for each loan. This fee may be rolled into the loan thereby reducing cash needed to close, and offers a more affordable mortgage payment. These terms can help more people qualify to buy a home.

     Eligibility requirements include size of the community and generous household income limits which vary by family size and location. To apply borrowers may choose their own participating local lender which includes banks, credit unions, and mortgage companies. Ginnie Mae, Fannie Mae, Freddie Mac, and most state housing finance agencies also participate in the guaranteed program. Loans can be used to finance new construction or to purchase an existing home. Homebuyers may purchase any price house they want, as long as they can demonstrate the ability to make the payments.