For a short two-week period, the Rural Housing Service (RHS) was guaranteeing loans again, but that came to end on Oct. 1.

RHS administrator Tammye Trevino notified lenders the agency had run out of funding to guarantee additional single-family loans.

The RHS guarantee loan program was shut down for several months during the summer due to funding problems and a transition to a new premium structure.

The National Association of Realtors was surprised by this shutdown, because Congress passed a continuing resolution that provides funding for loan guarantee programs through Dec. 3.

"This legislation specifically addresses supplemental funding for the rural housing insurance program making it unclear why the funds are not available," NAR president Vicki Cox Golder said in an Oct. 13 letter to U.S. Department of Agriculture (USDA) secretary Tom Vilsack.

USDA officials could not be reached for comment.

Congress is in adjournment until Nov. 15 and it is unclear when the lawmakers will pass a fiscal year 2011 budget to fund the USDA and other government agencies.

"During the temporary lapse of funding, Rural Development will issue conditional commitments 'subject to the availability of congressionally appropriate funds for purchase transactions,'" Trevino said in a letter to lenders.

But the recurring shutdowns are making lenders wary of these conditional commitments because of the risks.

The RHS letter notes that lenders assume "all loss default risk for the loan until Rural Development is able to fund it and issue a Loan Note Guarantee."

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.