Rural Housing

Impact of Refinancing and Selling FmHA Section 502 Homeownership Loans Gao ID: RCED-87-54 March 31, 1987

GAO reported on the Department of Agriculture (USDA) Farmers Home Administration's (FmHA) plan to sell rural homeownership loans, and compared the impact on revenues of selling or refinancing the loans.

The Omnibus Budget Reconciliation Act of 1986 requires the Secretary of Agriculture to sell loans to the public to reduce fiscal year 1987 federal outlays by over $1.7 billion. GAO noted that the Housing Act of 1949 provides an alternative to selling the loans because it requires that USDA request financially able borrowers to refinance their loans with available private credit. GAO found that: (1) FmHA would achieve greater savings by refinancing the loans because it would receive the total amount of the outstanding principal; and (2) since loan sales would necessitate discounting the loan amounts in order to market them to the public, revenues would decrease.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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