Rural Housing Overhaul: Bill Extends Mortgage Terms to 40 Years and Guarantees Rental Aid After Foreclosure

The Rural Housing Service Reform Act of 2025 is a massive update to how the USDA handles housing in rural America, touching everything from how long you have to pay off your mortgage to ensuring tenants don't get kicked to the curb when their landlord defaults. It focuses heavily on preservation, administrative cleanup, and finally dragging the Rural Housing Service (RHS) into the 21st century.

Protecting Tenants When the Landlord Fails

One of the most immediate impacts of this bill is found in Title I, which deals with foreclosure on apartment buildings that have USDA mortgages (Sections 514, 515, or 538). Previously, when the government had to take over a failing property, the fate of the tenants’ rental assistance could be murky. Now, the bill explicitly mandates that if the Secretary of Agriculture takes over or sells a property, the existing rental assistance contract must be maintained for the tenants (Sec. 101). For the folks living in these units, this means their housing subsidy doesn't disappear just because the owner missed mortgage payments. It’s a huge stability win for low-income renters.

Making Affordable Housing Last

If you live in or own affordable rental housing financed through the USDA, Title II is important. It makes the Housing Preservation and Revitalization Program permanent (Sec. 201). This program is designed to keep existing affordable units from falling apart or converting to market-rate housing. How? The Secretary can now restructure loans—meaning they can reduce interest, delay payments, or change debt terms—to make the property financially viable, provided the owner commits to keeping it safe and affordable for low-income residents. If a loan can't be restructured, the Secretary can still "decouple" the rental assistance and renew the contract for up to 20 years, ensuring the housing remains affordable even if the original USDA loan is gone.

Bigger Loans for Smaller Fixes

For rural homeowners, especially those with farm housing, the bill doubles the maximum loan amount available through the Section 504 program, which helps with minor repairs and improvements (Sec. 301). The limit is jumping from $7,500 to $15,000. If you needed a new roof or critical accessibility improvements, $7,500 often didn't cut it. Doubling that maximum loan amount means more substantial repairs are now within reach for low-income homeowners. Plus, the bill mandates that at least 60% of these loan funds be reserved for the very lowest-income applicants.

The 40-Year Mortgage and Liability Relief

Title VIII offers two major changes for individuals with Section 502 direct or guaranteed loans. First, the Secretary is now authorized to stretch out the repayment term for existing Section 502 loans up to 40 years (Sec. 801). This applies to all loans, even those already refinanced. For a busy family juggling rising costs, extending a 30-year term to 40 years can significantly lower monthly payments, offering much-needed breathing room. Second, if you sell your home and the new buyer assumes your Section 502 guaranteed loan, you are officially off the hook—the original borrower is completely relieved of liability once the transfer is approved (Sec. 802). This removes a significant financial risk for sellers.

Tech Upgrades and the 90-Day Promise

If you’ve ever applied for a government loan, you know the waiting game can be painful. The bill attempts to fix this by authorizing necessary funding for the RHS to upgrade its staffing and IT systems between FY2026 and FY2030 (Sec. 103, 104). Crucially, Title X sets a goal for the Secretary to review and make a decision on Section 502 and 504 loan/grant applications within 90 days of receiving them (Sec. 1001). To make sure they hit this target, the RHS has to start reporting annually on their application processing times and explain why any application took longer than 90 days.

Where the Fine Print Gets Interesting

While most of the bill is focused on improving access and stability, a few provisions raise questions. The authorization for staffing and IT upgrades uses the phrase “such sums as may be necessary” (Sec. 103), which means Congress isn't setting a specific dollar limit for this multi-year upgrade. While modernization is needed, the lack of a budgetary ceiling for five years of spending is something taxpayers should note.

Another notable change is in Section 701, which deals with transferring Section 515 apartment projects to nonprofit groups. To facilitate these sales, the bill dramatically increases the maximum interest rate cap for certain transactions from 9 percent to 25 percent. While this change is meant to make it easier for nonprofits to acquire and preserve these properties, removing the previous financial restraint of a 9% cap is a significant policy shift that warrants attention, especially concerning long-term affordability and costs.