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Subsidy Recapture Single Family Housing
(Direct Loans)
What is subsidy
recapture?
Payment assistance – also
called “subsidy” – is offered
to eligible homeowners with
USDA Rural Development Single
Family Housing Direct-financed
mortgages. This assistance
reduces eligible customers’
required monthly payments
based on their household income.
At loan closing, borrowers sign
a subsidy repayment agreement
which defines their loan
repayment terms, including the
circumstances under which all –
or a portion of – the subsidy must
be repaid (known as “subsidy
recapture.”)
How do I know if I will have to pay
subsidy recapture?
If you have ever received payment
subsidy, the subsidy is subject
to recapture.
The mortgage or deed of trust on a
property categorizes the subsidy as a
lien against that property. The lien will
not be released - and that means the
property cannot be sold - until subsidy
recapture is paid in full.
When is subsidy recapture repaid?
The borrower must pay subsidy
recapture when they:
• Sell the property
• No longer live on the property
(NOTE: Subsidy is also recaptured
following the death of a borrower.)
• Pay the loan in full
– If a borrower pays their loan
in full and continues to occupy
the property, subsidy recapture
can be deferred until they move
or transfer the property title to
someone else.
– As an incentive to encourage early
repayment, Rural Development
will offer eligible borrowers a
25-percent discount on their
– subsidy recapture if it is repaid
at the same time the loan itself is
paid in full.
– In the event of a loan default (a
foreclosure or deed in lieu of
foreclosure) the amount of subsidy
recapture due is equal to the
amount of subsidy received over
the life of the loan.
– In certain circumstances, the
subsidy recapture amount may
be refinanced. Call the Servicing
and Asset Management Office
(hereafter: Servicing Office) at
800-414-1226 to learn more about
this possible option.
How is subsidy recapture calculated?
Under the current formula, the
maximum subsidy recapture amount
is calculated at 50 percent of the
property’s value appreciation or the
total dollar amount of subsidy the
borrower received – whichever is less.
Other factors – such as the loan term,
average interest rate, percentage of
outstanding balance(s) on other open
loans, and whether other loans subject
to recapture are being paid off – also
are considered when the subsidy
capture is calculated.
How can I nd out how much subsidy
recapture I must repay?
You can get a verbal loan payoff
estimate – including subsidy
recapture – by calling USDA Rural
Development’s Servicing Office
Interactive Voice Response system at
(800) 414-1226. Choose the “payoff
information” option. Be ready to provide
an estimate of the current market
value of the property, along with an
estimate of any closing costs that may
be result from selling or refinancing.
A sample subsidy recapture
worksheet is available at this link:
https://go.usa.gov/xtTke.
NOTE: Because information is subject to change, always consult official program
instructions or contact your local Rural Development office for help. You will find
additional resources, forms, and program information at this link: https://rd.usda.gov.
USDA is an equal opportunity provider, employer, and lender.
Last Updated April 2022
Single Family Housing Subsidy Recapture
(Direct Loans) Worksheet
Subsidy Recapture Example – Sale of Home
Part 1. Calculating Value Appreciation Amount
1 Current market value of property $200,000.00
2 (less) Original amounts of prior liens and subordinate affordable housing products $2,000.00
3 (less) Rural Development (RD) loans being paid off $150,000.00
4 (less) Equity recapture due from Farm Program (FP) loan $0.00
5 (less) Closing costs $5,500.00
6 (less) Principal reduction (note rate) on RD loan being paid off $1,200.00
7 (less) Principal Reduction Attributed to Subsidy (PRAS) on loan being paid off $0.00
8 (less) Original equity $0.00
9 (less) Capital improvement credit $0.00
10 Value appreciation (Line 1 minus the total of Lines 2–9)
(If $0 or less, enter $0 and complete Part II; if more than $0, complete Part III.)
$41,300.00
Part II. Amount Due if There is No Value Appreciation Amount
11 Rural Development loans being paid off (Line 3) n/a
12 Equity recapture from FP loan to be collected n/a
13 PRAS to be collected n/a
14 Amount due (Lines 11 + 12 + 13)
(If negative, stop here. If positive continue to Part III.)
n/a
Part III. Percentage of Total Debt Subject to Recapture to be Paid Off Amount
15 Rural Development loans being paid off which are subject to recapture (Line 3) $150,000.00
16 Outstanding balance of all RD loans and the balance of prior non-RD liens and subordinate affordable
housing products being paid off [In this example, at the time of payoff, the prior non-RD liens and subordinate
affordable housing products were already paid in full.]
$150,000.00
17 RD loans being paid off as a percentage of all mortgage loans (Line 15 ∕ Line 16) 100.00%
Part IV. Value Appreciation Subject to Recapture Amount
18 Amount of value appreciation attributable to loans subject to recapture (Line 10; or if Part III was completed,
Line 10 × Line 17)
$41,300.00
19 Recapture percentage (the lesser of 50% or the percentage contained in the Subsidy Recapture Agreement)
[For the purposes of this example, 50% is used.]
50.00%
20 Value appreciation reduced by recapture percentage (Line 18 × Line 19) $20,650.00
21 Percentage of original equity (from Subsidy Repayment Agreement) 0.00%
22 Value appreciation, reduced by recapture percentage, attributable to original equity (Line 20 × Line 21) $0.00
23 Value appreciation subject to recapture (Line 20 − Line 22) $20,650.00
Part V. Amount Due if There is Value Appreciation Amount
24 Amount of payment subsidy received $30,000.00
25 Recapture amount (Line 7 + the lesser of Line 23 or Line 24) $20,650.00
26 Discounted recapture amount, if applicable (Line 25 × 75%) n/a
27 Final payoff amount (Line 3 + Line 4 + Line 25 or Line 26 as appropriate) $170,650.00
NOTE: Because information is subject to change, always consult official program instructions or contact your local Rural
Development office for help. You will find additional resources, forms, and program information at rd.usda.gov. USDA is an equal
opportunity provider, employer, and lender.
Last Updated April 2022
