• Key Insight: How a USDA pilot program expansion shifts closing authority to select lenders.
• Expert Quote: "Approved lenders will take greater responsibility for loan origination and approval, reducing delays." — George Kelly, rural housing service administrator at the USDA

Some lenders may have a competitive advantage when it comes to serving homebuyers in rural areas.

The U.S. Department of Agriculture Rural Development announced the expansion of the Delegated Authority Lender Interactive Test Environment Pilot Program for the Single Family Housing Guaranteed Loan Program. It gives participating lenders more authority in the closing process, allowing borrowers to move quicker through the homebuying process.

"Under the leadership of President Trump and Agriculture Secretary Brooke Rollins, expanding the Delegated Authority LITE Pilot Program will accelerate USDA lending while maintaining strong underwriting standards," Rural Housing Service Administrator George Kelly said in a press release. "Approved lenders will take greater responsibility for loan origination and approval, reducing delays and helping more rural borrowers achieve homeownership."

The USDA selected six additional lenders to participate in the pilot program: Fairway Independent Mortgage; New American Funding; Pennymac; Pulte Mortgage; Union Home Mortgage; and Bangor Savings Bank. Their involvement will begin on Dec. 1, according to the release.

The agency established specific eligibility criteria for these lenders, according to a USDA spokesperson, including: 

• Above-average loan performance, based on delinquencies, loss claims and default rates during the previous two years;
• Origination of at least 10 single family housing guaranteed loans over the last 12 months; and
• Being current on all lender certifications, fees and loan requirements, with no failed Corrective Action Reviews or Reduced Sample Reviews during the prior 24 months.

Lenders who invest internally to better manage end-to-end origination position themselves as a potential candidate for the program, which the agency plans to expand in phases, based on risk evaluations and capacity, a USDA spokesperson said.Through the initiative, the USDA permits lenders to offer 100% financed, no-money-down loans to eligible low- and moderate-income households in rural areas. It also backs the 90% loan guarantee. Borrowers can use a single family housing guaranteed loan to buy or cover the cost of renovating a home, the release said.

While the program aims to increase efficiency and reduce government time and resources needed, minimal agency involvement means lenders are solely responsible for following regulatory guidelines, emphasizing strong compliance practices. Failure to adhere could jeopardize the 90% guarantee.

"Being selected for this pilot program reflects our commitment to providing world-class service and innovative solutions to our borrowers, and we thank USDA for entrusting us with this increased responsibility," said Bill Cosgrove, CEO of Union Home Mortgage, in a separate press release.

USDA's other recent actions on rural markets

The USDA has now recently moved forward with two actions set to streamline the homebuying process in rural areas.

Earlier this month, the Department of Housing and Urban Department and USDA announced an agreement that aligns environmental standards and guidelines to support rural markets. The memorandum of understanding focused on category exclusions in the environmental review process and appointing a lead agency to streamline adoption of environmental impact statements.

The USDA and HUD also rescinded a Biden administration-era policy in April that they say added up to $31,000 to the cost of new homes, which the Mortgage Bankers Association said was particularly hindering first-time and rural buyers.