Rural Housing Programs

The Agriculture Department's Rural Housing and Community Development Service provides about $2.85 billion each year for rural housing loans. As of June 1995, the Service had an outstanding single-family and multifamily housing loan portfolio of about $30 billion, which represented a significant federal investment in affordable housing for the rural poor. The largest portion of the loan portfolio is for single-family direct and guaranteed mortgage loans that are made to families or individuals who are without adequate housing and who are unable to obtain loans from private lenders at reasonable costs. Rural multifamily rental housing loans, made to finance apartment-style housing or to buy and rehabilitate existing rental units, make up the rest of the portfolio. This report provides information on the Service's single- and multifamily housing loans programs and discusses suggestions made by GAO and others that could yield cost savings or management improvement in these programs.

GAO found that: (1) RHCDS is improving its loan programs' operations, but improving program delivery could save the federal government money and benefit borrowers and tenants in the programs; (2) centralized servicing of RHCDS loans could save over $100 million per year through staff reductions and greater staff productivity; (3) the number of direct loan program borrowers graduating to private credit could be increased by allowing borrowers to refinance their loans with commercial lenders and considering all loans for graduation, but RHCDS has few mechanisms in place to force loan graduation; (4) RHCDS could reduce multifamily housing program costs by shortening the terms of loans, eliminating certain equity loans made to owners, and funding more projects not requiring rental assistance; and (5) the process used to fund individual projects does not ensure that the neediest areas receive program assistance.