The Town With No Bank: How Rural America Lost Its Mortgage Lifeline
For decades, we’ve been told that the problem is demand. That people don’t want to live in rural America anymore. That lending dried up because the buyers disappeared. That it’s just the market working as it should. But what if we’ve been telling the wrong story? Because when you look closely, when you actually follow the data, the decisions, and the people left behind, it turns out rural America didn’t walk away from mortgage credit. Mortgage credit walked away from rural America.
The Collapse of Local Lending
Up until the 1980s, a family in a small farming town could walk into a local savings and loan or community bank and talk to a lender who probably knew them by name. These savings and loan associations (S&Ls) were the backbone of home financing in rural America; by 1980 nearly half of all U.S. home mortgages were held by S&Ls. But this localized system was fragile. When interest rates skyrocketed in the late 1970s, S&Ls found themselves paying more on deposits than they earned on long-term fixed mortgages. Losses mounted, and roughly one-third of S&Ls failed during the 1980’s S&L crisis, a collapse so widespread it eventually cost taxpayers over $120 billion. Congress reacted by deregulating the industry in a desperate bid for growth, but many S&Ls only dove into riskier ventures and dug the hole deeper. By the early 1990s, the S&L industry lay in ruins, its collapse taking down thousands of local lenders that had served small towns for generations.
For rural communities, the S&L crisis was a seismic shift. The number of S&Ls was cut nearly in half between 1987 and 1996 (from about 3,622 to 1,924 institutions). And it wasn’t just S&Ls. A wave of bank consolidations swept through in the aftermath. Larger banks absorbed or out-competed small-town banks, especially after laws in the 1990s removed barriers to interstate banking. The result? Two-thirds of all banking institutions have disappeared since the 1980s, plunging from almost 18,000 banks in 1984 to under 5,000 by 2021. This great shakeout left gaping holes in the financial map of rural America. Today, of the nation’s ~1,980 rural counties, 625 have no locally owned community bank at all, double the number in 1994. At least 35 rural counties now have no bank, and roughly 115 others are down to just a single branch serving an entire county. In towns that lost their only bank, the impact is palpable. “It’s really like a death sentence for a small town because the bank is the center of all activity,” one resident told The Wall Street Journal. With local lenders gone, rural borrowers suddenly faced a daunting question: Who will finance our homes now?
A River of Capital That Never Reached the Fields
Since the 1990s, the U.S. mortgage market has been reshaped by one promise: that by pooling and selling loans through Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) we could create infinite liquidity. The logic was sound. More liquidity means more lending. More access. More ownership.
And that’s exactly what happened… in larger cities.
In urban and suburban markets, GSE liquidity fueled massive waves of mortgage origination. It created an entire class of homebuyers, investors, and neighborhoods that didn’t exist before. But in rural America, something strange happened. The capital came. But the loans didn’t.
As hometown banks and S&Ls vanished, a very different system of mortgage lending rose to take their place. In the 1990s and 2000s, the GSEs, Wall Street and big-city lenders transformed the mortgage market. Instead of making loans and holding them for 30 years, lenders began to bundle mortgages into securities to sell to investors. This securitization revolution brought huge pools of capital into home lending and, in theory, made credit available everywhere. Financial innovations like credit scoring algorithms promised a quick, data-driven way to judge borrowers, replacing the old handshake and local knowledge with a credit report number. And critically, a pair of government-sponsored enterprises, Fannie Mae and Freddie Mac, dramatically expanded their role.
The GSEs had long existed to buy mortgages and keep money flowing, but around this time they became the dominant players, setting standardized loan terms and eligibility criteria for the majority of U.S. mortgages. If a loan met the precise “conforming” specifications (home type, loan size limit, borrower credit profile, etc.), Fannie or Freddie would buy it, bundle it, and sell it on the secondary market. This machine worked efficiently for suburban subdivisions and growing cities. But for rural America, the new one-size-fits-all mortgage model often didn’t fit at all.
In many ways, the new securitized, standardized system is the opposite of the old rural savings & loan. It favors scale, uniformity, and easily appraised collateral and tends to shun the quirky or nonconforming. To be fair, rural borrowers weren’t completely left out from the general expansion of credit. Commercial banks stepped into the void left by S&L failures; by the late 1990s, these banks were holding or originating many loans that S&Ls would have made before. Total U.S. mortgage lending boomed with lower interest rates in the 1990s, and banks could now quickly resell loans, reducing their risk. The Federal Home Loan Bank system, originally created to support S&Ls, even opened its doors to ordinary banks in 1989 to encourage more home lending in the post-S&L world. Alongside them, Ginnie Mae (Government National Mortgage Association) played a quieter role, guaranteeing securities backed by FHA, VA, and USDA loans. Together, this group promised to bring scale, efficiency, and liquidity to all corners of the market.
Yet, despite these changes, something was getting lost in translation for rural communities. The new mortgage market excelled at making 30-year fixed loans on standard houses in large markets, but it struggled with the realities of rural lending.
The Vanishing Rural Appraisers
At the same time, the appraisal workforce, once largely trained by those local S&L’s, began to disappear. In rural counties across the U.S., there were fewer mentors, fewer apprenticeships, and soon, fewer appraisers altogether. And what happens when you don’t have an appraiser? You don’t have an appraisal. And when you don’t have an appraisal, you don’t have a loan. Without local banks hiring and mentoring new appraisers, the pipeline dried up.
This acute hurdle in rural home lending today has its roots in a simple question: What is this property worth? In any mortgage, the appraisal, an independent assessment of a home’s value is key. But in rural areas, qualified appraisers are literally disappearing. The profession is aging, fees are often not sustainable in remote areas, and new entrants face lengthy training and certification. As a result, there are fewer and fewer appraisers serving vast rural regions. By 2016, state banking associations were sounding the alarm about a “critical shortage of qualified appraisers in rural areas”. They noted a ripple effect: loan approvals were being delayed or derailed because banks, buyers, and sellers were stuck waiting weeks or months for an appraiser to travel out and evaluate a property. In some cases, deals simply fall through when an appraisal can’t be obtained in time. This logjam not only frustrates borrowers but also makes small-town lenders even less willing to attempt loans, since each deal becomes an unpredictable saga.
Even when an appraiser is secured, rural properties pose a “no comps” problem. Appraisers determine value largely by comparing recent sales of similar homes (“comparables”), but in rural communities there are often few recent sales, or none at all that match the property’s characteristics. For example, imagine a farmhouse on 10 acres with a barn, there may be nothing quite like it sold in the last year within 50 miles. Data bears this out: appraisals in rural areas tend to use fewer comparable sales on average. From 2013 to 2021, the share of appraisals that included at least five comparable properties was 13 percentage points lower in rural areas than in high-density urban areas, indicating how much harder it is to find comps in sparsely populated markets. With thin comparable data, valuations can be highly uncertain. Lenders fear the unknown and may apply extra conservative discounts or require larger down payments on rural homes. The “complex appraisal issues” noted by rural housing experts often translate into undervalued properties (making it hard for buyers to get a large enough loan) or simply a loan at all. In short, the disappearance of rural appraisers and the difficulty of valuations have further hollowed out access to credit, a homebuyer in a small town might be perfectly qualified, yet still struggle to finance a purchase because there’s literally no one around to appraise the house or no data to appraise it with.
For example, in North Dakota in 2018, 55% of counties had zero appraisers residing there, and two-thirds of licensed appraisers lived in metros. Regulators and lenders reported appraisal delays that extended rate locks, impeded credit, and delayed closings.
By the 2000s, evidence was mounting that rural mortgage borrowers were “less well served” than their urban counterparts. Many rural loans simply didn’t fit neatly into the secondary market’s criteria. Recognizing this gap, Congress in 2008 gave Fannie Mae and Freddie Mac a specific “Duty to Serve” underserved markets and they explicitly named rural housing as one of those markets (alongside affordable housing preservation and manufactured housing). It was a telling sign: even at the height of modern mortgage finance, policymakers saw that rural areas were being left behind, requiring a mandate to steer even a bit of capital their way. The GSEs began pilot programs and special initiatives, but the impact has been modest at best. Rural loans are often small in balance and harder to process, which doesn’t align well with high-volume, automated lending. In 2014, for example, rural areas accounted for about 20% of all conventional mortgage loans but only 14% of total loan volume, reflecting that rural mortgages tend to be for much lower dollar amounts on average. Thin profit margins and awkward fit in the securitization pipeline made rural mortgages less attractive to large lenders. And so, even as America’s overall mortgage market grew more sophisticated and poured out credit, rural homebuyers continued to face special obstacles that the new system wasn’t built to address.
The “Non-Conforming” Home Problem
A home mortgage is more than a financial transaction. It’s a permission slip to stay. Or to return. Or to build. And when that permission is harder to get in rural areas, because of appraiser deserts, loan limits, or underwriting rigidity, it means:
- Fewer homes are built
- Fewer families can move in or stay put
- Young people leave because buying is harder than renting
The USDA has found that homeownership is still the preferred tenure in rural areas, and the demand is there. But the modern system doesn’t support the transaction volume to match that demand. The result is a kind of slow attrition.
Rural population decline often tracks closely with lending decline. Rural counties with the largest banking losses often show correlated population decline, school closures, and job losses. Places with weaker housing market liquidity are less likely to attract new families or retain current ones. Lack of credit depresses new construction, so even as older homes deteriorate, nothing replaces them. And importantly: many people who want to stay in rural areas simply can’t access the capital to renovate aging properties or convert land into livable housing. We’re not just seeing people choosing to leave rural America, we’re seeing systems quietly nudging them out.
When mortgage credit gets harder to access, it doesn’t just depress homeownership.
It shrinks the population, hollows out tax bases, closes schools, and undermines community resilience. The GSEs can say rural lending is supported “on paper,” but the reality in the field is this: if you can’t get a mortgage, you can’t stay. Not sustainably. Not generationally.
So we need to ask the question, and ask it loud. How much of rural America’s decline is not cultural, or technological, or inevitable… but simply the result of a mortgage application that never got approved?
rural America is anything but uniform.Perhaps the most systemic issue is that many rural homes and borrowers just don’t fit the standard mortgage mold. Modern lending is built on uniformity, but rural America is anything but uniform. Homes are older on average, often needing significant repairs or updates. Many are manufactured homes or modest houses on large plots of land. Some are multi-purpose properties (a residence attached to a small business or a farm) that don’t cleanly match bank underwriting checkboxes. Income sources can be different too, rural borrowers are more likely to be self-employed or seasonal workers, making their incomes lumpier and harder to document. All these factors add up to a category of loans labeled “non-conforming,” meaning they fall outside the criteria that mainstream banks and GSEs readily accept. A rural home that sits on 40 acres might be disqualified from a conforming mortgage simply due to lot size. A manufactured home might be ineligible unless it’s permanently affixed to land in a certain way. An older house in a remote area might fail to meet strict inspection or insurance requirements. The end result: modern lenders and loan guidelines often turn away rural properties as too hard to fit, too small, or too risky, even if the price is modest and the buyer has the ability to pay.
One glaring example is the issue of “small dollar mortgages.” Rural real estate is far more affordable (land values are lower and wages are lower), so purchase prices are often well below big-city averages. Yet getting a mortgage for a $80,000 country home can be far more difficult than getting one for a $300,000 suburban house.
Lenders are reluctant to originate very small loans because fixed costs like underwriting and servicing eat up a higher share of a small loan’s value, and the profit is minimal. Research confirms that small mortgages (under $150,000) are in short supply, even though there are plenty of low cost homes for sale in rural America. As a consequence, a huge portion of rural home sales occur without any mortgage at all. Many buyers pay cash (if they’re lucky enough to have savings or equity), or they resort to riskier alternative financing like seller-financed contracts or rent-to-own deals. Over 2005–2022, only 26% of homes under $150k were bought with a mortgage, compared to 71% of higher-priced homes. And because rural areas have so many low-priced homes, this credit gap hits them hardest. In fact, just 43% of rural home purchases involve a mortgage, versus about 62% in urban areas. That means a majority of rural buyers are finding other ways to transact, a striking indicator of how the formal mortgage system is bypassing small-town America.
Figure 1: Share of home sales financed by mortgages in urban (blue) vs. rural (orange) areas from 2004 to 2022. On average, only about 43% of rural home sales were financed with a mortgage, compared to 62% of urban home sales. This gap illustrates how many rural buyers must rely on cash or alternative financing when traditional mortgages aren’t accessible.
Even during periods of heightened housing demand in rural areas, the lending gap has persisted. The COVID-19 pandemic is a prime example. Remote work and the desire for space prompted thousands of people to move from cities to rural communities in 2020–2021. In fact, after decades of stagnation, the nation’s overall rural population increased by about 1.2% from 2021 to 2023 as some chose country life. This influx drove surging homebuying interest and rising prices in many rural counties. Yet, the mortgage data shows that even amid this boom, rural buyers remained at a disadvantage. They were more likely to have their mortgage applications denied (20% denial rate) than urban applicants (12%), and many didn’t even apply in the first place. A portion of would-be rural borrowers are essentially discouraged out of the formal process, lenders may informally tell them that financing a certain property or obtaining an appraisal will be impossible, or the borrowers anticipate trouble and pursue a cash or seller-financed deal instead. These “soft denials” (when a loan dies before a formal decision) are believed to be more common in rural areas where lenders have little flexibility for unconventional situations. The net effect is that even when rural housing demand rises, the formal mortgage approvals gap persists. The modern mortgage system, with its strict criteria and efficiency-driven calculus, continues to underserve rural homebuyers in good times as well as bad.
One potential solution to the small loan problem is to provide direct operating subsidies or loan loss reserves to Community Development Financial Institutions (CDFIs) that originate rural home loans under $150,000. This would help offset the high per-loan cost without requiring those lenders to turn a full profit. There is precedent for this kind of support through the U.S. Treasury’s CDFI Fund and certain USDA pilot programs. They should also consider developing a streamlined underwriting path for low-risk rural borrowers, something akin to an “EZ Mortgage” for small loan amounts. For example, loans under $150,000 could use simplified documentation, rely on pre-approved property types, or use limited-scope appraisals. This approach would reduce origination costs without compromising safety and soundness. The VA’s Interest Rate Reduction Refinance Loan (IRRRL) program already uses similar principles in the refinance space and could serve as a model.
A Vicious Cycle: Less Infrastructure, Less Lending, Fewer Homes
Layer by layer, a structural picture emerges. The collapse of local banks and S&Ls removed the on-the ground infrastructure of lending; the appraisers, the loan officers, the branches, the local knowledge. In its place rose a distant, centralized system that has little incentive to adapt to idiosyncratic rural needs. As that system bypasses many rural borrowers (e.g. rejecting “non-conforming” properties or declining small loans), it further depresses the volume of mortgage lending in those areas. Low loan volumes, in turn, make it even less attractive for a bank to maintain a branch or for a real estate professional to service the area, completing a cruel feedback loop. Fewer banks lead to fewer mortgages; fewer mortgages give banks even less reason to stay.
One exception to this trend has been Community Development Financial Institutions (CDFIs), mission-driven lenders that serve underserved communities, including many rural ones. CDFIs play a critical role by offering personalized underwriting, flexible terms, and outreach where traditional lenders won’t go. However, their reach is limited by capacity and funding. While CDFIs are lifelines in some areas, they are not scaled to reverse the broader contraction in rural credit on their own at this time. Instead, they’re patching a sinking ship that still lacks federal support for meaningful repair. It’s a downward spiral that some rural advocates call the “hollowing out” of rural credit. The data on small business lending echoes this trend: the value of small loans to businesses in rural communities is less than half of what it was in 2004, after inflation, and has fallen below even 1990s levels.
The human impact of this systemic decline is felt in stories across the country. Consider a young family hoping to buy an old family farmhouse in a county where the only bank closed years ago. The house is within their budget, but the nearest licensed appraiser is 100 miles away and booked out for two months. When an appraisal finally comes, the lack of comparable sales forces a valuation so low that the bank will only finance part of the purchase price. The family doesn’t have the extra cash, and the deal falls apart. Or take a prospective owner in a small town who finds an affordable duplex to live in one unit and rent the other, only to be denied a loan because the property’s mixed use doesn’t fit the lender’s guidelines or the appraiser, if they can find one, can’t complete the appraisal due to lack of data. These scenarios are increasingly common. In many rural places, hopeful homebuyers face obstacles unknown in suburban America, not because of personal financial weakness but because the system isn’t built for their context.
After decades of these compounding forces, rural America’s access to mortgage credit has quietly eroded. It happened gradually: one bank merger here, one regulation there, one retiree professional not replaced, year after year. But over time, the cumulative effect has been dramatic and measurable. Fewer rural families are able to borrow to buy or improve homes; more are stuck in aging houses or paying rent because buying is too hard. Communities with no lenders see little new housing construction or renovation, why build if no one can finance a purchase?
This drags on local economies and even population growth, reinforcing the cycle of decline. As one report summarized starkly, “the financial fabric of rural America is fraying”. Even as urban housing markets recover or boom, many small towns are left behind, watching their housing stock age and their young people depart for cities where getting a mortgage isn’t a moonshot.
Rural mortgage credit isn’t failing for lack of demand, it’s failing for lack of bridge-builders. The promise of liquidity was real, but without the human infrastructure to channel it, it veered off, skipping the rural off-ramp. If we want to rebuild rural America, not just hope for it, we must rebuild the foundation:
Banks. Appraisers. People. Relationships. Infrastructure.
Only then can we connect that river of capital back to the communities ready to receive it.
Duty to Serve: A Patchwork of Support
Given the market’s shortcomings, what have the big housing agencies done? Fannie Mae and Freddie Mac, the housing GSEs, do provide a lot of indirect support for rural mortgages, but mostly for those loans that happen to resemble urban loans. They will readily purchase a mortgage for a rural home if it fits standard guidelines (proper appraisal, conventional structure, borrower meets credit and income criteria, etc.). The tougher cases, however, still struggle to gain GSE support. Recognizing this, the GSEs have launched targeted programs under their “Duty to Serve” mandate. For example, they’ve looked at ways to promote manufactured home lending (since roughly 60–70% of manufactured homes are in rural areas) and to work with small banks or USDA rural loan programs to buy more rural loans. But progress has been limited. One internal Fannie Mae assessment candidly noted the many challenges: “Appraising rural properties tends to be more challenging. Rural properties are more likely to be manufactured homes and have larger lot sizes. Rural loans have smaller balances… housing demand is weak… small financial institutions struggle with secondary market barriers.”
All of these issues mean that even a well-intentioned GSE finds it hard to inject liquidity into markets that don’t look like the metropolitan norm.
Other federal players fill some gaps, the USDA’s Rural Housing Service offers Section 502 direct loans for low-income rural buyers and guarantees loans by others, and the Federal Housing Administration (FHA) insures many loans in rural places that wouldn’t qualify for conventional financing. But these programs, while vital for those they reach, are relatively small in scale and often underfunded. Meanwhile, the Farm Credit System, a century-old cooperative lending network originally for farmers, does provide home loans in rural areas as part of its mission, but typically for those who also have agricultural or land-based needs, not the average aspiring homeowner in a small town.
Ultimately, the patchwork of government and cooperative programs has helped at the margins, but it hasn’t stemmed the overall tide. The fact that Fannie and Freddie needed a congressional mandate to focus on rural mortgages underscores how the mainstream housing finance system has historically treated rural America as an afterthought. And despite that mandate, rural mortgage lending remains, by many metrics, at its lowest relative level in decades.
Enter Ginnie Mae, the lesser-known counterpart to Fannie and Freddie. Unlike the GSEs, Ginnie Mae doesn’t purchase loans; it guarantees securities made up of FHA, VA, and USDA loans, ensuring investors get paid even if borrowers default. This backstop is critical for government-insured programs that disproportionately serve rural and lower-income borrowers, especially those with smaller down payments, weaker credit profiles, or non-conforming properties. In fact, USDA’s Section 502 guaranteed loan program, one of the only dedicated rural home loan options, is securitized exclusively through Ginnie Mae.
But here too, scale is a problem. USDA’s direct loan program (which it originates itself) serves only a few thousand families per year nationwide. The guaranteed program does better, but lender participation is uneven, and processing delays are frequent. FHA, for its part, insures many rural loans, but its minimum property standards and high insurance premiums can still be a barrier for rural homes that need repair. And VA loans, while critical for eligible rural veterans, require that appraisers be on the VA panel, a major hurdle in rural areas with few or no appraisers available. A problem so common now, the VA coined the term “appraiser deserts”.
Basically, Ginnie Mae plays a pivotal role by making FHA, VA, and USDA loans possible in capital markets, but even this layer of support can’t overcome the deeper access issues tied to appraisals, lender participation, nonstandard housing, and thin local infrastructure. So what we’re left with is a patchwork: well-meaning programs and guarantees stitched together, each filling small gaps, but none capable of reversing the broader decline in rural mortgage access.
Appraisal “Modernization”: Automated Collateral Evaluation, Appraisal Waivers and Algorithms
In recent years, Fannie Mae and Freddie Mac have rebranded a familiar concept: appraisal waivers. Under the label of “appraisal modernization,” they have introduced Automated Collateral Evaluations (ACE), Value Acceptance, hybrid appraisal models, and a new real estate role they created called Property Data Collectors (PDCs). These are promoted as breakthroughs. They are designed to streamline valuations, reduce costs, and shorten closing times. But they mostly benefit urban, conforming, high-density markets. In rural America, these modernizations are either irrelevant or worse, exclusionary.
Appraisal waivers are not new. The GSEs have used versions of them for decades. Since 2020, however, both Fannie and Freddie have expanded their use, especially for single-unit homes with low loan-to-value ratios and strong data availability. Fannie Mae’s Value Acceptance and Freddie Mac’s ACE rely heavily on automated valuation models (AVMs). These models pull from prior appraisals, public records, and comparable sales. If the algorithm finds a match, no appraisal is needed. But AVMs rely on dense, recent, and uniform data. Rural properties rarely meet those conditions. They also fail to reflect key rural property features like acreage, barns, manufactured housing, and off-grid systems. As a result, most rural homes do not qualify for waivers, regardless of borrower quality.
In 2022, the GSEs introduced inspection-based waivers such as Value Acceptance plus PDC and ACE plus PDR. These use Property Data Collectors to gather photos, basic condition data, and measurements. These individuals are not licensed appraisers and do not offer valuation opinions. They simply collect surface-level data that is later fed into GSE algorithms. In urban areas with high density and standard housing stock, this system may be efficient. In rural settings, it breaks down quickly. There are not enough data collectors in many counties, and the logistics of traveling 50 to 100 miles between homes eliminate the time and cost savings. Not to mention the lack of data to feed the algorithms. The model was never designed for low-density geographies, and it shows.
In late 2024, the GSEs announced the further expansion of appraisal waivers. Eligibility increased to 90 percent loan-to-value for traditional waivers and 97 percent for inspection-based versions. The policy also included a small carve-out for low-income buyers in designated high-needs rural areas, but only for homes under $200,000. Manufactured homes were excluded from the expansion entirely. So while “appraisal modernization” is celebrated as an innovation in much of the mortgage industry, it has failed to reach the parts of the country that arguably need the most help. Every element of this system, from AVMs to waiver eligibility to data collection, depends on data uniformity and transaction volume. Rural housing markets do not operate that way.
In urban areas, these tools increase speed and reduce friction. In rural America, they do something very different. They introduce new forms of exclusion, embedded inside technology and policy choices.
The result is not a solution. It is another bypass.
“Appraisal modernization” is not solving the rural appraisal problem. It is working around it. Unless the system is redesigned to include acreage, manufactured housing, and non-uniform sales data, the modernization effort will continue to reward efficiency at the cost of equity. The risk is not that rural America is invisible. The risk is that it has been excluded, under the banner of progress.
UAD 3.6 and the Coming Transition
Another looming challenge for rural mortgage lending is the upcoming rollout of the new Uniform Appraisal Dataset (UAD) 3.6, scheduled to become mandatory after November 2026. This overhaul is the largest change to appraisal reporting standards in over two decades. While the goal is to modernize the way appraisals are structured, transmitted, and analyzed by standardizing data points for improved categorization and automation, it also introduces a significant data collection burden that disproportionately impacts rural appraisers and properties.
The GSEs have stated that support for existing UAD 2.6-based forms, such as the 1004 and 1073, will continue only “for as long as those forms are accepted,” offering no guarantee of long-term parallel support. With UAD 3.6 on track to become the default format after November 2026, it is reasonable to expect that Fannie Mae and Freddie Mac will begin phasing out the older forms shortly after. However, FHA, VA, and USDA have not yet confirmed whether they will adopt UAD 3.6 or continue using the legacy forms. This creates significant uncertainty for appraisers and lenders alike, particularly in rural markets where a large share of loan volume depends on those agencies.
If FHA, VA, or USDA decline to adopt UAD 3.6, they will likely need to publish and maintain their own form-specific guidance, effectively creating a legacy version of the Selling Guide. If they do adopt UAD 3.6, it will bring a major procedural shift for thousands of appraisers who still rely on clipboard inspections and hand-drawn sketching. As of 2025, industry surveys suggest that more than 75 percent of residential appraisers continue to operate this way, making the field data capture requirements under UAD 3.6 a steep learning curve.
This challenge is especially acute for rural appraisers. Rural properties are often larger, with more square footage, more acreage, multiple outbuildings, and complex site characteristics that require far more detailed observation and documentation than a typical urban or suburban home. Collecting dozens of new standardized data points under UAD 3.6 is far more time consuming on a 3,000 square foot home on 20 acres with a shop and a barn than on a 1,400 square foot house in a subdivision. The increase in workload is real, but whether rural appraisers will be able to make up that lost efficiency in increased fees remains uncertain. With ongoing downward pressure on fees, many appraisers would say that is unlikely.
To comply with UAD 3.6, appraisers will need to record detailed ratings for building components, condition, quality, site features, views, and other granular details that are difficult to document without a mobile device or dedicated data collection software. For rural appraisers working long travel routes with limited tech infrastructure and little room in the budget for new tools, this creates both a financial and logistical burden.
Without significant support or flexibility, the result may be even fewer appraisers willing to complete assignments in rural areas. Turnaround times could lengthen, and some loans may fall through altogether due to appraisal constraints. In practice, a rule designed to improve appraisal quality and standardization may end up deepening the existing coverage gaps in rural markets.
Like so many innovations in the mortgage space, UAD 3.6 risks becoming another bypass. It may streamline appraisals in urban areas, but without thoughtful rural adaptation, it could further marginalize rural borrowers and the professionals who serve them. If the GSEs, FHA, VA, and USDA do not act swiftly, with funding, transition support, or clear implementation plans, rural markets could face a compliance cliff that will be difficult to recover from. In regions already affected by appraiser shortages and thin infrastructure, appraisal modernization without rural accommodation could do more harm than good.
Rebuilding the Bridge to Rural Credit
From the rubble of the 1980s S&L collapse to the high-tech lending algorithms of today, the story of rural mortgage lending in America is a story of systemic unraveling. It’s a chronicle of how well-intended deregulation and market innovation unintentionally swept away the local institutions that once nurtured rural homeownership. It’s a tale of how the rise of a national, standardized mortgage market failed to account for the diversity of rural life, the older homes, the sprawling acreage, the sparse sales data, the self-employed borrowers and thereby left entire regions only partially served. The decline has been driven by feedback loops spanning decades: as rural lending became scarcer, the professionals and infrastructure supporting it drifted to greener pastures, which in turn made rural lending even harder. Over time, a national system emerged that no longer fit all the places it was meant to serve.
Importantly, this is not a story of lack of desire for homeownership in rural America. The demand is there, we saw it during COVID-19 as urbanites and locals alike sought out country homes. And it’s not a story of inherently riskier borrowers, in fact, studies find that rural borrowers with small mortgages can be just as reliable, if not more so, in repayment. Rather, it’s a story of mismatch: a modern financial system that optimizes for efficiency and scale, operating in a rural landscape characterized by low density and uniqueness. The result is a structural credit drought.
Understanding this history is the first step in addressing the challenge. Each chapter, from the fall of hometown lenders, to the one-size-fits-all secondary market, to the appraiser shortage and small loan gap, shows how we arrived at today’s rural lending crisis. It didn’t happen overnight or because of one policy; it accrued over decades of changes that, piece by piece, chipped away at rural America’s ability to finance its homes.
As I conclude this narrative, there are no easy solutions offered, only the hope that by seeing the full picture of how rural mortgage access has been hollowed out, policymakers, industry leaders, and communities can spark a conversation about how to rebuild a more balanced system. The front porch lights are still on in rural towns, and the American Dream of homeownership still burns bright. The challenge ahead is finding a way to reconnect that dream to a functioning, supportive mortgage infrastructure. To once again weave a financial fabric in rural America that can hold the weight of its homeownership aspirations.
Sources: The data and historical details in this article are drawn from a range of authoritative sources, including Federal Reserve analyses, government reports, and rural housing research organizations. Key insights on the S&L collapse and bank consolidation come from the Federal Reserve and FDIC, while mortgage market transformations are documented by Fed publications. The rural appraisal and lending challenges are highlighted by industry groups and the Housing Assistance Council. Statistics on rural mortgage decline and COVID-era impacts are provided by studies from Pew Charitable Trusts and USDA.
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An excellent article. Thought provoking and educational. Thank you. / How many more appraisers may have been present in the market, if not for the $12 billion or more dollars the appraisal management industry industry raked off the top of appraisers fees? How many more appraisers would be present to help revitalize the capacity of rural lending and rural access, if the gse’s would have maintained a traditional appraisal program instead, one that fostered the need for more appraisers, rather than less? Central planning never works.