Section 502 final packaging rule to take effect in May
The effective date for expansion of USDA’s Section 502 packaging demonstration has been moved up to May 19, 2016. A final rule for the program was published April 29, 2015 with an effective date in summer 2015, later deferred to October 1, 2016, and now moved forward to May.
The program establishes requirements for individuals and organizations that help low-income first-time homebuyers apply to USDA for mortgages from the Section 502 direct program. (This is different from the Section 502 guarantee program; applicants for those mortgages apply through banks and USDA guarantees their loans.) Packaging – helping an applicant prepare documentation to request a mortgage – has been permitted for decades, and in 2010 USDA established a pilot program in a few states to regularize the process and provide fees to successful packagers. Now the program is being expanded to cover the entire country.
The notice of the May 19 effective date states that all the pilot intermediaries have been accepted as intermediaries under the program. Each may choose to cover new states as well as the states it already covers. Around the effective date, USDA will issue program guidance for the certified loan application packaging process, including how others can apply to be intermediaries.