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The number of housing loans originating in rural areas dropped from 2012 to 2013 and is well below pre recession levels. Loans for purchase of homes grew slightly from 2012 to 2013, but refinance loans dropped during the period.

Rural mortgage markets continue to struggle in the aftermath of the national housing crisis.

The number of home loans in rural areas declined by 14.1% between 2012 and 2013, according to the most recent Home Mortgage Disclosure Act (HMDA) data. The drop off in lending is largely related to refinance activity. Gradually increasing interest rates and tighter underwriting criteria have slowed mortgage refinancing nationally, as well as in rural communities. Refinance lending in rural and small town communities declined by 23% in 2013 from 2012 levels.

Rural home purchase lending, on the other hand, increased by 2.3% from 2012. After reaching a 10 year low in 2011, rural home purchase loans increased for the past two years to 440,489 in 2013.

While these trends suggest an improvement in home sales, rural and small town home purchase loans remain 52% below the pre recession levels of 2006. Home purchase loans continue to make up a smaller portion (35%) compared to refinance loans (57%) of all rural lending activity.

A message from the Rural Assembly

Conventional Lending Continues Slow Rebound

The federal government’s role in home lending grew substantially in the wake of the housing crisis through the Federal Home Administration (FHA) mortgage insurance program, the Department of Veterans Affairs (VA), and Department of Agriculture’s (Farm Service Agency or Rural Housing Service) loan guarantee programs. Up to 90% of first lien home purchase loans involved a conventional loan before the recession, but had declined to just over 50% by 2009. (The study restricted data to first lien home purchase loans to focus on home purchase activity. In addition, removing second liens helps remove piggyback loans and mitigate double counting.)

Over the last three years, conventional home purchase lending has steadily grown as government assisted lending decreased. Rural and small town conventional home purchase originations increased by 14% while government supported originations declined by 17%. The overall level of conventional lending, approximately 282,000 originations in 2013, is still just 41% of what it was in 2004, two years before the pre recession peak of 2006.

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Rural counties have a disproportionate share of loans with higher interest rates. Click the map to make it interactive and explore county level data.

A message from the Rural Assembly

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