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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 find 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