The Community Home Lenders of America (CHLA) is warning federal mortgage regulators that restructuring plans at the U.S. Department of Agriculture could jeopardize the USDA’s efforts to modernize the Rural Housing Service (RHS), relied on by households in rural census tracts for access to government-insured, low-downpayment mortgages.

Last month, the USDA announced that “select” Washington, D.C.-based positions in its Rural Development Mission Area, which houses and administers RHS, would be relocated to St. Louis and Dallas. The department described the new locations as “operational hubs” supporting loan and grant processing, as well as program management.

In a letter to USDA leadership, the CHLA expressed concern that the proposed relocation of RHS employees “could undermine program performance and contribute to the loss of experienced employees should they opt to resign rather than relocate their families.”

The trade group, which represents mostly small and midsize mortgage lenders, said active modernization efforts to implement delegated underwriting authorities could be derailed if restructuring disrupts operational capacity. The change would allow approved lenders to originate RHS loans without the customary USDA review before closing.

“These objectives depend not only on policy changes, but also on experienced program staff who can provide consistent interpretations and timely guidance to approved lenders,” said the CHLA.

A final rule published by the RHS in March amended existing regulations to allow approved lenders in the Single-Family Housing Guaranteed Loan Program to underwrite loans and obtain loan note guarantees with limited to no involvement by RHS. The SFHGLP provides a 90% loan note guarantee to approved lenders.

Although full implementation of the delegated underwriting program is scheduled for September 2028, operational or staffing disruptions stemming from the planned restructuring could affect the rollout of a two-year pilot program to test these changes, which is currently scheduled to begin Sept. 1, 2026.

“Realigning Rural Development’s reviews, approvals, and servicing structure, together with significant improvements in the agency’s IT systems, will help rural America achieve more without government getting in the way,” explained USDA Deputy Secretary Stephen Vaden in a press release announcing the restructuring plans last month.

USDA has not detailed how many employees it plans to relocate from the Washington area, nor which specific offices within the RHS may be affected. RHS did not return a request for comment by time of publication.

The shift to delegated underwriting would bring RHS closer to other government mortgage programs serving low- and moderate-income households in rural areas, including low- and no-downpayment programs offered by the Federal Housing Administration and the Department of Veterans Affairs.