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Subsidy Recapture

 
 

Payment subsidies received on loans approved after October 1, 1979 are subject to recapture. This means that when the property is sold, transferred, or no longer occupied by the customer, all or part of the subsidy granted must be repaid to the government. The amount of subsidy recapture will be determined by the increase in property value since the loan originated. Subsidy recapture must be calculated when the loan is paid off.

Not all USDA Rural Development Loans are subject to recapture. Please call our Customer Service Department at 1-800-414-1226 or 1-800-438-1832 (TDD/TTY Hearing Impaired Only) to find out if your loan is subject to recapture or to receive payoff information. We are available from 7:00 A.M. to 5:00 P.M. Central Standard Time (CST), Monday through Friday.  

 
 

Subsidy Recapture Payment

 
 

Subsidy recapture must be paid when the property is sold, transferred, or no longer occupied by the customer.

If the loan is being paid off but the customer continues to live in the property there are two payment options:

  • Pay the subsidy recapture when the loan is paid off
    The subsidy recapture will be discounted by 25% if this option is chosen.

  • Defer payment of the subsidy recapture until the property is sold, transferred, or no longer occupied by the customer
    The subsidy recapture will not be discounted when the loan is paid off, nor will the discount apply in the future if this option is chosen.

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    Statement of Loan Balance(s) for Loans Subject to Recapture

     
     

    With a touch-tone telephone, call 1-800-414-1226, and select option #2 from the Main Menu, and select option #1 from the Payoff Information Menu. Through our Interactive Voice Response system you can request a Statement of Loan Balance be mailed to the homeowner of record. The Statement of Loan Balance(s) provides the current outstanding balances of the loan, which includes principal, interest, fees, late charges, and escrow (if applicable). The statement also includes the total amount of payment assistance (subsidy) granted. The amount of subsidy can be quite large, but in many cases this amount is reduced when subsidy recapture is calculated.

     
     

    Verbal Estimated Payoff Quotes

     
     

    With a touch-tone telephone, call 1-800-414-1226, and select option #2 from the Main Menu, and select option #2 from the Payoff Information Menu. Our Interactive Voice Response (IVR) system can provide a verbal estimated payoff amount based on the information you enter. The IVR is easy to use and will provide instructions when you call. To calculate the estimated payoff amount you will need to enter the estimated value of the property and estimated closing costs that may be incurred as a result of selling or refinancing the loan. This information is necessary to estimate the subsidy recapture to be paid. The estimated payoff should not be used to pay off your loan.

     
     

    How to Receive a Final Payoff Statement

     
     

    In order to calculate subsidy recapture and provide a payoff statement, certain documents need to be submitted to our Payoff Department. The type of transaction (refinancing, selling, or paying off) will determine the documents needed. The payoff statement will be faxed or mailed to the address of record within 5 business days of receipt.

    Refinancing

  • Customerís name, loan number(s) and written authorization to release payoff(s).

  • A copy of a Uniform Residential Appraisal Report (usually available from the lender). Any capital improvements must be itemized on a separate addendum to the appraisal.

  • A copy of the Good Faith Estimate or estimated settlement statement from the lender.

  • Payoff good thru date.

    Selling

  • Customerís name, loan number(s) and written authorization to release payoff(s).

  • A copy of the signed sales contract and/or a copy of a Uniform Residential Appraisal Report. Any capital improvements must be itemized on a separate addendum to the appraisal.

  • A copy of the estimated settlement statement from the closing agent.

  • Payoff good thru date.

    Paying off the loan and not refinancing or selling

  • Customerís name, loan number(s) and written authorization to release payoff(s). Include a statement that the customer is staying in the property and not transferring title.

  • A copy of a Uniform Residential Appraisal Report. Refer to the local yellow pages or the internet for appraisers in your area. Any capital improvements must be itemized on a separate addendum to the appraisal.

  • Payoff good thru date.

    Not Subject to Recapture

  • Customerís name, loan number and written authorization to release payoff(s).

  • Payoff good thru date.

    Not all USDA Rural Development loans are subject to recapture. Please call our Customer Service Department at 1-800-414-1226 to find out if your loan is subject to recapture and to confirm the documents needed for you to receive final payoff(s). We are available from 7:00 A.M. to 5:00 P.M. Central Standard Time (CST), Monday through Friday.

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    Capital Improvements

     
     

    If certain improvements, referred to as capital improvements, are made to the property, the value of the improvements added may be used to reduce subsidy recapture owed. To receive credit for capital improvements, the appraiser should submit an addendum to the appraisal. Instruct the appraiser that an itemized list of the improvements or additions and the value the improvements or additions added to the property should be submitted along with the appraisal. The cost of the improvements or additions should not be submitted and will not be used. Replacement items such as kitchen cabinets, floor coverings, roofing, siding, furnaces, appliances, and water heaters are not considered capital improvements. Maintenance items or repairs that maintain the property in good condition, such as yard maintenance, painting, and wallpapering, are also not considered capital improvements in our calculation of subsidy recapture. Examples of capital improvements include, but are not limited to, room additions, adding a fence, deck or enclosed porch.

     
         
         
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