USDA will stop accepting mortgage applications

We've talked in the past about the pending changes to the USDA rural development mortgage program. In order to implement the changes in its computer system, USDA has decided not to accept applications during the last week of Nov. The reason stems from the large backlog of applications in many states. USDA doesn't feel it can maintain two processing systems, so it will process the applications it receives by the 21st under the old system. It will process applications it receives starting on Dec 1st using the new system. During the last week of Nov, USDA will play catch up.

Given that the outage period is during Thanksgiving week, I hope the impact will be minimal, except on the USDA employees who get to work overtime. However, there is one area of concern. USDA acknowledged that if it is unable to work through the backlog of applications, any that are not processed will be returned to the lenders unapproved. For these applications, borrowers would have to sign new documents, and lenders would have to underwrite the applications again before submitting them to USDA for approval. This potentially could add another week or two to the loan processing time.

The takeaway from this is that if you have a customer using a USDA loan, and you want to close in early Dec, encourage all parties to act with urgency. You want USDA to receive that loan package well before the Nov 21st cutoff date, if possible.