Earlier this week, Leah Ballard, executive director at Habitat for Humanity of Archuleta County, shared an appeal sent out by Habitat for Humanity International, concerning new policies announced by the U.S, Department of Agriculture (USDA) that could affect Habitat’s ability to provide housing in rural communities. The policy changes involve the USDA 502 Direct Loan program.
Dear Habitat rural advocates,
I’m reaching out because your organization has indicated that you use the USDA Section 502 Direct Loan program or serve rural communities. Recent federal policy changes made by the U.S. Department of Agriculture may significantly affect your work and the families you support, and your quick advocacy is needed.
On February 10, USDA Rural Development issued major revisions (PN 655) to the Section 502 Direct Loan Handbook (HB13550). Because handbook changes do not go through a public comment process, these updates took effect immediately.
Key changes and significant impact on Habitat’s work
Several of the revisions introduce new administrative, financial, and programmatic barriers that could limit the usability of 502 Direct for low-income rural homebuyers and nonprofits like Habitat for Humanity.
Key concerns include:
- Loan limits reduced from 80% to 60% of HUD 203(b) levels — with no exceptions for modest homes. Lowered limits apply to the full appraised value (including all down payment, land, soft-second mortgages, sweat equity, and construction subsidy), making it harder for families to qualify, especially in higher-cost rural areas.
- New appraisal rules requiring an appraisal before funding obligation (no obligations “subject to appraisal”) will remove the flexibility that affiliates depend on to manage construction and financing timelines.
- Increased administrative burden, including requiring state director review twice for every loan, risking significant administrative delays.
- Removal of SNAP from income calculations, which could disqualify very low-income families who previously qualified.
- Reduced packaging fees, which threaten the sustainability of nonprofit packagers who help families navigate the process.
Collectively, these changes could make the 502 Direct Loan Program unworkable for many Habitat organizations and could significantly reduce the number of rural families able to access affordable homeownership. Retaining even a single change would add to the difficulty of Habitat’s work at a time when lawmakers across party lines are pursuing legislation to increase the housing supply and improve affordability.
What we are asking from you:
We are urging all network partners who use or rely on the 502 Direct Loan Program to contact the office of your U.S. Representative(s) and both of your state’s U.S. Senators as soon as possible to share:
- Your concerns about the handbook revisions.
- Concrete examples of how these changes are already affecting – or would affect – your community, your work and the families you serve.
Please ask your members of Congress to urge Secretary of Agriculture Brooke Rollins to withdraw the handbook changes and restore the previous guidance so the program can continue functioning effectively for rural communities.
To support your outreach:
A template email/letter is attached.
A list of housing staff contacts for all House and Senate offices is also included.
When you reach out to Congressional offices, please copy me (cruff@habitat.org) and Jessica Anderson, Director of Federal Relations (jeanderson@habitat.org), so that we can help track engagement and support follow up where needed.
Thank you for your partnership and your advocacy on behalf of rural families. These changes will have real consequences unless Congress intervenes, and your voice can help ensure that the USDA 502 Direct Loan Program remains a viable path to homeownership.
In partnership,
Carley Ruff
Senior Director of US Government Relations
Habitat for Humanity International