Changes will exclude Lenoir from USDA home loan program
Updates to a federal program for low-cost loans are dropping homebuyers in Lenoir and other small cities from eligibility in the program.
“It’s a big blow to the housing sector for the city of Lenoir,” said Tom Thuss, branch manager of Starkey Mortgage in Lenoir.
Thuss said he normally organizes six to eight of this type of U.S. Department of Agriculture loan each month. He called the changes “not a good thing for our area.”
“It means that a big segment of the market may be forced to look for a home outside the Lenoir city limits,” and fewer buyers looking for homes in Lenoir may translate to a drop in home prices and homes staying on the market longer before they are sold.
Although this change may be catching homebuyers by surprise, it actually has been coming for 20 years.
What are known as section 502 loans, which are for for low- and middle-income people to buy, build, renovate or repair homes, and section 504 loans and grants to improve or modernize a home are made available to people meeting income eligibility requirements in rural areas. The USDA made more than $4 billion in these loans in North Carolina from 2009 to 2012.
For the purposes of these loans, the USDA defines "rural" as a city with 20,000 or fewer residents, unless that city is part of a metropolitan statistical area, a grouping of nearby municipalities across county lines. Within a metropolitan statistical area, only cities of 10,000 or fewer are considered rural.
Lenoir's population is about 18,000, not much different than it has been for decades, but until 1993 Caldwell County was not part of a metropolitan statistical area. That year, it was added to the Hickory-Morganton MSA, and that started the clock ticking. Under a rule adopted in 1983, municipalities with populations of 25,000 or fewer that were considered "rural" prior to the 1990 census could retain that designation until after data from the 2012 census update is released, which will be Oct. 1.
As of Oct. 1, 34 cities in North Carolina -- including Morganton, Conover, Newton, Lincolnton and Shelby -- will lose the "rural" designation for these loans because of either the MSA rule or population growth.
The loans will still be available in the rest of Caldwell County, including unincorporated areas, Thuss said.
Lenoir City Manager Lane Bailey said that while the city will no longer be eligible for the 502 and 504 loans, there are other options available through the Western Piedmont Council of Governments, which is based in Hickory.
“As we have growth in population, these things happen,” Bailey said. “But there are still other programs.”
Bailey said in some federal programs, Lenoir is considered rural and in others it's urban, depending on varying criteria.
Thuss said this will put more pressure on homebuyers in need of loans that don't require large downpayments.
“I think it’s going to place a premium on having a very good loan officer,” he said.