Van Buren loses ‘Rural Development’ status for home loan aid

Van Buren's eligibility for the Rural Development loans appeared safe following passage of a new federal Farm Bill earlier this year, but the community was dealt a blow Thursday (July 31) after it learned the city was no longer considered a rural community eligible for the loans.

According to Karen Phillips, housing and development director at the Crawford-Sebastian Community Development Council, the local administrators of the USDA Rural Development Loan program began looking at eligibility requirements after passage of the Farm Bill and noted that Van Buren was no longer eligible in part based upon its proximity to Fort Smith, meaning the community will officially lose eligibility status on Oct. 1.

Vickie Davis, an agent with Sagely & Edwards Realtors in Fort Smith, told The City Wire that eligibility requirements state that a community with no more than 35,000 residents must not be considered part contiguous part of a metropolitan statistical area. If the Arkansas River did not divide the two cities, Van Buren would be a contiguous neighbor of Fort Smith and is included in the MSA.

A meeting held at the USDA's office on Brooken Hill in Fort Smith today, featuring USDA State Director Lawrence McCullough, confirmed the loss of the loans for the community of 23,000.

"I guess everyone was confused about what the purpose (of the meeting) was," Philips said. "It was just to discuss Van Buren's rural eligibility, so that gave us at least a glimmer of hope thinking that they were wanting to hear comments from us, facts and all of the details about Van Buren and why it should be eligible. In the end, the said it was a done deal and Van Buren would no longer be eligible."

The Rural Development Loan, Philips said, allows low income residents to purchase a home with no money down and lower mortgage insurance premiums than traditional residential financing options.

"Their income limits went into the $70,000 range before the guaranteed loan part (would kick in), which meant you could get less mortgage insurance and no down payment requirements. It was a good option to get affordable payments and purchase without a large amount of money saved up first. It was a good option for everyone, not just low income families."

Executive Director Jackie Krutsch of the Van Buren Chamber of Commerce said the real hurt will likely not necessarily be middle class families, but those who would not be able to realize the dream of homeownership without the Rural Development Loan. She cited per capita income figures to show that Crawford County falls below other counties and the state in salary. In 2011, figures she cited from the U.S. Bureau of Economic Analysis listed Crawford County has having a per capita average income of $27,830. Statewide, the figure stood at $34,032 while just across the river Sebastian County's per capita average annual income was $38,513.

"You can see the difference between Sebastian and Crawford Counties is pretty significant," she said.

While the change in status for Van Buren could hurt homebuyers, Krutsch noted the impact it would have on mortgage originators, as well.

"Our home mortgage originators are very concerned about how this could impact their business and individual clients wanting to purchase a home," she said.

Developers are also likely to be impacted, Krutsch said, noting that neighborhoods throughout the community her chamber serves have focused on serving customers depending on Rural Development loans.

"Even if they (purchasers) don't have the down payment, a family of four could get into a house in the price range of $130,000 to $140,000. In Van Buren, there have been a lot of housing developments in the last 15 years in the price range for Rural Development guidelines. In the right price range, essentially. When you limit that funding mechanism, then you've taken those people out of the market."

Davis said the most likely scenario as far as impact is concerned is more buyers will buy homes outside of the Van Buren city limits in order to qualify, likely spurring growth in other communities.

"I think it's just going to shift people from Van Buren to outlying communities elsewhere in Crawford County. It's just going to put a lot of people out of buying a home in Van Buren because a down payment can get expensive. So I think it will be quite a bit of a hit (to the local economy)," Davis said.

For buyers in Van Buren looking to get in before the Oct. 1 change in eligibility, Philips said it was not too late, but potential buyers had to act fast with their mortgage lenders.

"The requirement to have an application to USDA is by Sept. 30. I definitely would not wait that long, though. They need to act as soon as possible to turn in an application and then talk to their local lender specifically about contract deadlines," she said, adding that other programs within USDA, such as the "Guaranteed Loan," may have other requirements that should be verified with a lender.