CHLA Calls on RHS to Eliminate
“Anachronistic” Interest Rate Cap
Contact: Scott Olson For Immediate Release
571-527-2601 October 12, 2018
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The Community Home Lenders Association (CHLA) today submitted a comment letter (enclosed) to the Rural Housing Service (RHS) calling on RHS to eliminate an “anachronistic” cap that sets a maximum interest rate on RHS single family loans.
“Our principal recommendation regarding this comment letter is that the RHS eliminate the program’s maximum interest rate provision, which:
(1) is an anachronism from an earlier era,
(2) is no longer needed in light of stronger provisions (QM) that cap points and fees, and
(3) has the impact of reducing the availability of RHS loans for consumers,” the CHLA letter said.
The letter pointed out that FHA, which had a similar cap in the 1990s when RHS instituted their cap, has since eliminated its cap – and other loans programs such as Fannie and Freddie similarly don’t have such a cap .
CHLA responded to questions in RHS’ Request for Information by making the case that the cap makes it difficult or impossible to originate RHS loans for certain borrowers, particularly since fixed loan origination costs are proportionately higher in lower dollar amount RHS loans. Therefore eliminating the cap would increase the availability of mortgage loans to borrowers in underserved and rural communities.
CHLA’s letter also pointed out that borrowers would still have protections if the cap were eliminated, because the RHS loan origination market is competitive and Congress adopted the Qualified Mortgage (QM) requirement in 2010, under which RHS now has a points and fees cap on their single family mortgage loans.