The Rural Development guarantee:

USDA Rural Development Single Family Housing Program serves as a safety net for mortgage lenders.  The USDA provides the full faith and assurance of the U.S government that any financial loss resulting from servicing the loan will be reimbursed in full up to an amount not exceeding 90% of the original loan amount.  All loss up to an amount not exceeding 35% of the original loan is fully reimbursed.  Any loss amount exceeding the 35% is 85% reimbursed.  This leaves the lender only 15% exposed on the loss amount above the 35% of original loan.  In the majority of cases, the total loss does not exceed 35% of the original loan and the lenders are fully reimbursed. 

This guarantee provides lenders an expanded level of protection against losses.  The quality of this guarantee allows lenders to easily sell the loans on the secondary market. 

For additional information, contact your local Rural Development office.