Subsidy Recapture - Not On the USDA Guarantee Rural Loan

Date: June 28, 2012

One of the most common misconceptions of the USDA Guaranteed Rural Loan Program is that the U.S. Government will take a portion of the equity gain away when the homeowner sells or refinances their mortgage.

This is often the case with the USDA Direct Rural Loan Program, which is designed to assist low income households afford a mortgage loan payment, by having the U.S. Federal Government make a portion of the payment on behalf of the homeowner. The Government accounts for this assistance by maintaining a Subsidy Recapture account, which will continue to increase so long as homeowner's payment remains subsidized. When the house is refinanced or sold the Government will want the subsidy returned to them; hence the term "Subsidy Recapture".

However, with the USDA Guaranteed Loan program there is no "Subsidy Recapture" account. Homeowners who have or are thinking about obtaining the USDA Guaranteed Loan are able to maintain 100% control of all equity gained on the ownership of the their property.

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