USDA Section 538 is a provision within the Housing Act of 1949 that establishes a loan guarantee program to facilitate the development of affordable rental housing in rural areas in the United States. Under this program, the U.S. Department of Agriculture (USDA) provides loan guarantees to approved lenders, including private financial institutions and state housing finance agencies.
The purpose of Section 538 is to encourage lenders to offer loans to developers or sponsors of affordable rental housing projects in rural communities by reducing the lender’s risk. The loan guarantees act as a form of insurance for lenders, promising to repay a portion of the loan if the borrower defaults.
By offering these loan guarantees, USDA aims to increase the availability of safe and affordable rental housing for low-income individuals and families in rural areas, helping to address the housing needs of these communities.