Usda/rural Development Foreclosure Timeline

Aug 17, 2016
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#1
I hope I'm posting in the right place. If not, please move this to where it should be.

I wanted to start this thread for two reasons. First, because there are precious few resources online right now for information about what happens when you default on a USDA loan, and I thought this might be helpful for others at some point. And second... I may need some support as I move forward through this! Because it's starting to feel real, and it's scary!

So, I will give some quick info and then start a new post below with the timeline so far.

I have a USDA/Rural Development Section 502 Direct Loan.
2nd mortgage for repairs through a community services agency partnered with USDA.
Got the loan in 7/2013.
I am in a judicial state.
I am in a recourse state.
Beginning credit score (according to Credit Karma) is 797.
(so close to the 800 I have been striving for, for so long! D'oh!)

So, time to take a deep breath and commit myself to this journey. I hope I'm doing the right thing.
 
Likes: PatZZ
Aug 17, 2016
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#2
7/13/16: Made my last house payment. Technically, this is the June payment but I pay during the grace period every month because that is when I have the money.

8/15/16: Received my bill for August 2016 house payment. Late fees assessed, etc. The total amount I owe now to bring account current is $1,561.94. The thing is, it's kind of comforting in a way, because I don't have the money to pay it. Literally. I have $1,200 in my savings and $38 in my checking. I couldn't pay it even if I wanted to. Which means I can't pay it. This has changed from me *choosing* this to me honestly, really not being able to pay it. Granted, that will hopefully change soon as I save more money, but now I can say that I can't afford my house and I am not lying in the least little bit. I honestly feel at this point like I am trying to save myself and my family from financial ruin. The guilt is dissipating as the numbers stare me in the face.

8/22/16: Received letter from USDA. Nervous to open it. Was an escrow statement, showing the breakdown of last year's escrow (was short) and projections for this coming year's escrow - the usual: higher taxes, higher home insurance... but for some reason, the monthly payment stated in order to cover next year's expenses while also making up for last year's shortage ends up being $23.04 LESS per month than what I am paying right now. Their math is wonky, methinks.

There was a note at the bottom of the statement that reads: NOTE: IF YOUR MORTGAGE PAYMENTS ARE DELINQUENT, PLEASE MAKE PAYMENTS IN THE AMOUNTS BILLED MONTHLY.

As of 9/1/16, (2 months late, although I am still in grace period for August) I have not had any phone calls or letters from USDA, and they have not reported any late payments to any of the three credit companies.

9/1/16 update: In the mail today was an envelope from USDA, dated 8/25/16. Basically telling me that my Payment Assistance Agreement is scheduled to expire in about one year and that it is based on income information that I provided a year ago and that if anything has changed, that I need to be in touch with them. If I make over $25,401/year, then my income has increased by at least 10% and they need to know about it.

The thing is, I have contacted them every single time my income increases (at least 3 times in the last 3 years) and they respond telling me that they cannot adjust my subsidy as I am already getting the maximum amount. When I try to clarify that my income has *increased* so I am letting them know (as instructed) in case it lowers my subsidy, they respond again, thanking me for the information but that they cannot make any adjustments as I am already receiving the maximum amount. The whole thing would be laughable if it weren't so ridiculous. Unfortunately, in my annoyance and naivete in it not occurring to me that I might need all records someday in case I default, I think I threw these letters out.

The letter received today is asking me to send copies of all current income information. Including anyone else in the household. Which would include my teenage son's income, and I am so sick of dragging him and his job/income into everything. It's his and it doesn't involve anyone else. The letter also states that I need to let them know if I am not occupying the property. The whole thing reeks of them trying to find out why I am not paying the mortgage and what my income looks like in context of that. Then it warns me that failure to disclose accurate and truthful information may result in program assistance termination and prevent me from receiving it in the future. Whatever. I don't want it anyway, if I'm not staying here. So that part of it doesn't concern me. But then it says that if I receive any assistance that I am not entitled to, I will be required to repay it. Honestly, I don't even know the amount of the assistance because I have never received anything from anyone about how much they are paying or anything. No yearly statement, nothing.

Then, at the bottom:

WARNING: Section 1001 of Title 18, United States Code, provides: "Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willingly falsifies, conceals or covers up by any trick, scheme or device a material fact, or makes any false, fictitious, or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined under this title or imprisoned not more than five years or both."

Which makes me think that this is a MUCH different ballgame than all those people on the forum playing games with, and lying to, their lending banks (no judgement! I envy your chutzpah!). But my lender is the US Government. Maybe I should just send them a letter saying that I no longer wish to receive the assistance and that will be that.

9/2/16: Voicemail from Centralized Servicing Center. Asking me to please call them back.

9/3/16: Received a Notice of Missed Payment. Regarding not receiving payment for 7/16 and 8/16. Says if you are able make your payment, send at once. If you cannot make your payment, call CSC "We may be able to help you keep your home."

9/6/16: Received tax bill from town. Oops; forgot that they don't send it to USDA directly. So now I have to send it to them, and... what? Hope they pay it? Do they have to? I'm not technically in default yet and taxes are paid through escrow.. We'll see..

9/14/16: Received call from Centralized Servicing Center. Didn't answer. They left a voicemail. Just telling me it's important that I call. Left days and hours they are open.

9/15/16: CSC called two times, about an hour apart (10:30ish and 11:30ish). Recorded message saying it's very important that I call them back. Left days and hours they are open.

9/16/16: Received regular monthly bill for September. Says "Your account shows a past due amount. Please send in payment for this amount" blah blah blah. I don't think they've reported me to the credit bureaus yet as all my credit websites show normal credit ratings. A couple have dropped a few points, likely from the Amazon credit card inquiry.

9/17/16: Mailed a copy of property tax bill to escrow. Not sure if they pay it, as the left hand probably doesn't know what the right is doing, or if they will just laugh at me. But I am supposed to send it to them, so I did.

9/17/16: Received letter in the mail saying that if I do not pay the past due amount in full (or contact them to devise a payment plan) in the next 60 days, I am being sent to the Department of the Treasury for "Offset" - meaning they will garnish whatever they can to help repay the debt (disclosure: I am on SSDI, so they can take 15% of that every month. I am slowly increasing my work hours as my health allows with the hope that within the next couple years, I will be working fulltime and will not receive it anymore) They can also take my state and federal income tax return. So, it looks like I have to pull the Bankruptcy card out of my back pocket a little sooner than I would have liked. I was hoping to hold onto that until the bitter end to prolong things and also to avoid a deficiency judgement. The silver lining of doing it now is that not only will they not be able to take any of my SSDI or my tax returns, but also now I won't have to worry at all anymore from the beginning about them coming after me for a deficiency and they also must immediately cease all efforts to collect money from me. They can continue with foreclosure proceedings, but they can't contact me, via telephone or mail, about payment. So, it is what it is. I will get that done before my 60 days is up. I was thinking I should do it immediately. But all I need to prove to them is that I filed for the automatic stay to begin, and I could literally file the week before my 60 days is up. That gives me almost 2 more months, plus the amount of time of the automatic stay. Right? Time for more research. (But if they know they can't contact me to try to collect $, will that speed up the foreclosure process? I have decided that I don't really want contact with them at all because that will help lessen some of this anxiety, but I don't want to do something that will purposefully speed the process up)

9/17/16: Phone call from USDA. Pre-recorded. Please call us. Days/hours. "Your immediate attention is required.. Please call today..."

9/17/16: Call from USDA, about 5 minutes later.. Same voicemail.

And that is where I am right now. For most of you, this will seem long-winded and navel-gazing perhaps, but for people with USDA loans, I think it might be helpful.
 
Likes: PatZZ
Aug 17, 2016
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#3
9/18/16: Credit score on Credit Sesame went down 4 points for a "delinquent account" reported. I feel sad. I know that credit scores are largely meaningless, especially if you don't need (or want to use) credit. But still. I pride myself on my financial responsibility and it stinks. (So, just to keep track.. they waited until my account was 60+ days delinquent to report to a credit bureau)
 

PatZZ

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Jan 30, 2011
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#4
WHEN to file BK is crucial as you probably know. I would see about getting a free consult with a BK attorney as soon as possible. Maybe speak to 2 or 3 since sometimes we can't trust attorneys either. "When" you file has a lot to do with what your plans are. Depending on what the USDA can or will do, you can save a lot of money not paying the mortgage and letting the foreclosure run its course. Your credit will tank, but a foreclosure will do that anyhow.
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Aug 17, 2016
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#5
Yes, the timing can be used to one's advantage, for sure, which is why I was hoping to hold off until way later in the process. But considering that they're about to send me to the Treasury for offset, I need to do it in the next 60 days. I have no other debt I want to discharge though. I will reaffirm my car and continue my payments on that, and that is all I have for debt. ?? I just want to get out from under the house and I want USDA to not garnish any money.

And at this point, I guess I'm not super concerned about my credit score. I'm more worried about this maybe not taking as long as I hope it does and not being able to save as much money as I want (our cars both need winter tires, etc. You know... life.)

I will check into a free consult. Not today, because I am feeling overwhelmed. But soon. First step is to take the online credit counseling thing you have to take in order to file for bankruptcy.
 

PatZZ

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Jan 30, 2011
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#6
Yes, the timing can be used to one's advantage, for sure, which is why I was hoping to hold off until way later in the process. But considering that they're about to send me to the Treasury for offset, I need to do it in the next 60 days. I have no other debt I want to discharge though. I will reaffirm my car and continue my payments on that, and that is all I have for debt. ?? I just want to get out from under the house and I want USDA to not garnish any money.

And at this point, I guess I'm not super concerned about my credit score. I'm more worried about this maybe not taking as long as I hope it does and not being able to save as much money as I want (our cars both need winter tires, etc. You know... life.)

I will check into a free consult. Not today, because I am feeling overwhelmed. But soon. First step is to take the online credit counseling thing you have to take in order to file for bankruptcy.

My plan is also to save BK for the last strike.

Much luck. I wish I knew more about USDA to be of help. Not in my expertise at all. But if I come across something I will post it. So they can offset before foreclosing? That is an awful loan. Amazing that the government would set up something like that.
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Aug 17, 2016
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#7
Yes, they can send a letter of impending offset as soon as a loan is 60 days delinquent, which I read today, and that's just about when they sent it to me. Just over 60 days. Who knew the government was so on the ball? It seemed like when I was trying to get the loan, they were definitely not on the ball.

What is ironic to me is (and someone correct me if I'm wrong) that the US government made a law that a bank or mortgage servicer cannot garnish wages, etc even AFTER a foreclosure without permission from a judge first. Yet the US government itself can take 15% of someone's monthly disability check as soon as they're 60 days late. So, it's wrong for the banks to do it.. so wrong that they made a law forbidding it, but they can do it.

??
 
Aug 17, 2016
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#8
9/20/16: Received an email from Credit Karma that my score has changed. Logged in. YOWZA! My Transunion score went down by 83 points!
It's just a number. I am not a number. It's just a number... It means nothing...
 
Aug 17, 2016
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#9
Update, as it's been about a week since my last.

I have received a few more phone calls. Let them go to voicemail. One or two were pre-recorded, one was a real person. No letters. Yesterday marked 90 days late.

I have been stressing about this whole bankruptcy thing. On the one hand, in order for them to not garnish 15% of my SSDI check every month, I have to declare bankruptcy. No other way around it. Letter says I have 60 days from date of letter before they start garnishing. On the other hand, I am nervous about making sure I can keep the cash I have saved up in my savings account thus far, and also concerned about making sure my son can keep his car, as he is under 18 and my name is also on the title (therefore, it is technically my car, as I understand it). It is an old beater, worth about $500, but in my state the wildcard exemption is only $400 of any property... I am sure there are ins and outs of all of this that I won't know until I talk to someone, which I haven't done yet, because I am overwhelmed. I really want to do this on my own (aside from a free consultation) because the whole point is to save enough money to be able to have a good nest egg for rent saved up for when we get kicked out of here. If I have to spend $1,500 on a lawyer, that's already more than half my savings so far. A Chapter 7 would be fairly straightforward, as my only debt is my car and my house. My car falls under the $5,000 equity in one vehicle exemption and I would keep paying on it and keep it, and the house I would surrender (NOT reaffirm). I have no other debt, no other creditors. So I feel like as long as I research the dickens out of this, I can do it on my own. I just want to make sure my savings and my son's car are both safe.

But now for the good news that I just happened to stumble upon this morning during my daily obsessive researching; something the USDA didn't tell me when they sent their letter threatening me that if I didn't work out a plan with them in the next 60 days, that they were sending my account to the Dept. of Treasury to start taking 15% of my SSDI checks... I found out this morning that the two rules of federal debt offset are:

1. They cannot take more than 15%
2. They cannot leave you with less than $750 after offset.

So, if your SSDI check is $800, they can only take out enough to leave you at $750, not the whole 15%.

Therefore, say your whole entire SSDI check is $727. As that is less than $750 already, they can take exactly $0 of it.

So... that gives me a bit of breathing room in terms of figuring out this bankruptcy thing. So basically, I can call their bluff, not file bankruptcy, not pay attention to the letter one little bit and wait and see what happens. At this point, I only need to make sure that I file bankruptcy before I file my income taxes at the beginning of next year (as I don't want them to take my tax return money - earned income credit, child tax credit, etc.) But by that time, my son will have turned 18, which means my name can be taken off his title for his car and the only thing I will have to worry about at that point is my savings, but I will have time to speak with an attorney without feeling rushed (I thought I only had about a month to figure all this out!) and maybe they will be able to ease my mind about that one.

I do know that in a Chapter 7 bankruptcy, they are not allowed to take any SSDI money that you have received, as long as the money can be traced back to SSDI. So if I had money in my savings account and I say that it is all from SSDI, how could anyone know that it's not? I mean, for all intents and purposes, IT MIGHT BE. How even would *I* know? So maybe that precedent would keep it safe? More research for me...

If anyone has any ideas or suggestions, feel free to share them! I feel I am on this USDA/federal home loan journey all alone amidst this sea of "regular bank-mortgage people" and it's awfully lonely/scary over here in this little dinghy, looking over at all of you on the supertanker over there. Someone throw me a life preserver, or even just a message in a bottle, saying "Hey! We see you over there! Keep treading water; you'll be ok!"

And good luck to all of you out there, also treading water!
 
Aug 17, 2016
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#11
So, not a lot had happened after this last update. I may have gotten a phone call or two. I let them go to voicemail and they always say the same thing. Usually pre-recorded, telling me how important it is that I call them, etc.

But yesterday, I got two envelopes in the mail. One is a "Notice: 60 Days Past Due" letter. (I am actually 90 days past due, but as I am still in that third missed payment's grace period, I guess it's not counted yet.

Anyway, the notice says how they haven't received payment yet and if I do not send payment or contact them, I may lose my home. (Yes, underline, of course, to make it seem very scary. I also find it interesting how they use the word home instead of house, obviously to appeal to your emotions and not the logical business-dealings part of your brain.

It tells me where to send the money and that if I can't pay, I need to call them and tell them why so maybe they can help me.

The second letter... At the top, it says "Final Notice Before Foreclosure Review".

I'm not sure what a "foreclosure review" is as I have never seen anything referred to as this. I will search the forums a bit and see what I can find, but basically the letter says "We have already written to you several times to tell you that we have not received your home payments." Then the next underlined part about how I may lose my home... Gives me an address to send the check. If I can't pay, I need to call, they may be able to help me. Then it says that if they do not hear from me, they will begin acceleration and foreclosure. "Once this happens, we may not be able to help you and you will probably lose your home."

They give me some options:
I could sell my home before they accelerate and foreclose.
I could contact another lender to refinance my debt.

Then it goes on to say that if they foreclose and sell my home:
You will be charged for all the subsidy that you have received since you obtained the loan
You will be responsible for any remaining debt after the sale
Your wages could be garnished
Your Federal Income Tax refund could be used to pay your debt
Your credit rating will be damaged.

So, that's that.

If I proceed with this, I will need to declare bankruptcy, that part is obvious.

But if they were trying to scare me, I guess they did. It finally feels real now. I was hoping I would fall through the cracks for months and months like some of you before they accelerated my account, etc. but it looks like they are pretty on the ball. I live in a judicial state so I still think it would take at least a year from date of last payment, but to declare bankruptcy and wreck my credit and everything that goes along with foreclosure (publishing it in the papers, embarassing my teenagers, etc) I was hoping for a whole lot longer than a year.

So now I am wondering if this is something I should be doing right now. My son is in his senior year of high school... do I want to be dealing with the stress of all of this while also trying to be emotionally present during this huge transition in our lives? Am I making a huge mistake? I have always been so responsible with money; this whole thing feels very foreign to me but I was ready to do it and now I feel unsure.

I really really wish there were other USDA borrowers on here who I could gain some insight from. I feel like I'm really going it alone here.
 

Mannax

LoanSafe Member
Dec 23, 2016
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#12
So, not a lot had happened after this last update. I may have gotten a phone call or two. I let them go to voicemail and they always say the same thing. Usually pre-recorded, telling me how important it is that I call them, etc.

But yesterday, I got two envelopes in the mail. One is a "Notice: 60 Days Past Due" letter. (I am actually 90 days past due, but as I am still in that third missed payment's grace period, I guess it's not counted yet.

Anyway, the notice says how they haven't received payment yet and if I do not send payment or contact them, I may lose my home. (Yes, underline, of course, to make it seem very scary. I also find it interesting how they use the word home instead of house, obviously to appeal to your emotions and not the logical business-dealings part of your brain.

It tells me where to send the money and that if I can't pay, I need to call them and tell them why so maybe they can help me.

The second letter... At the top, it says "Final Notice Before Foreclosure Review".

I'm not sure what a "foreclosure review" is as I have never seen anything referred to as this. I will search the forums a bit and see what I can find, but basically the letter says "We have already written to you several times to tell you that we have not received your home payments." Then the next underlined part about how I may lose my home... Gives me an address to send the check. If I can't pay, I need to call, they may be able to help me. Then it says that if they do not hear from me, they will begin acceleration and foreclosure. "Once this happens, we may not be able to help you and you will probably lose your home."

They give me some options:
I could sell my home before they accelerate and foreclose.
I could contact another lender to refinance my debt.

Then it goes on to say that if they foreclose and sell my home:
You will be charged for all the subsidy that you have received since you obtained the loan
You will be responsible for any remaining debt after the sale
Your wages could be garnished
Your Federal Income Tax refund could be used to pay your debt
Your credit rating will be damaged.

So, that's that.

If I proceed with this, I will need to declare bankruptcy, that part is obvious.

But if they were trying to scare me, I guess they did. It finally feels real now. I was hoping I would fall through the cracks for months and months like some of you before they accelerated my account, etc. but it looks like they are pretty on the ball. I live in a judicial state so I still think it would take at least a year from date of last payment, but to declare bankruptcy and wreck my credit and everything that goes along with foreclosure (publishing it in the papers, embarassing my teenagers, etc) I was hoping for a whole lot longer than a year.

So now I am wondering if this is something I should be doing right now. My son is in his senior year of high school... do I want to be dealing with the stress of all of this while also trying to be emotionally present during this huge transition in our lives? Am I making a huge mistake? I have always been so responsible with money; this whole thing feels very foreign to me but I was ready to do it and now I feel unsure.

I really really wish there were other USDA borrowers on here who I could gain some insight from. I feel like I'm really going it alone here.
 

Mannax

LoanSafe Member
Dec 23, 2016
2
0
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#13
I am in a similar situation and was wondering what was going on in your process at todays date. Is there anyway you could contact me, I would seriously appreciate it. I would love to be able to speak on the phone with you.
 

PatZZ

LoanSafe Member
Jan 30, 2011
1,793
129
63
Nearby
#14
So, not a lot had happened after this last update. I may have gotten a phone call or two. I let them go to voicemail and they always say the same thing. Usually pre-recorded, telling me how important it is that I call them, etc.

But yesterday, I got two envelopes in the mail. One is a "Notice: 60 Days Past Due" letter. (I am actually 90 days past due, but as I am still in that third missed payment's grace period, I guess it's not counted yet.

Anyway, the notice says how they haven't received payment yet and if I do not send payment or contact them, I may lose my home. (Yes, underline, of course, to make it seem very scary. I also find it interesting how they use the word home instead of house, obviously to appeal to your emotions and not the logical business-dealings part of your brain.

It tells me where to send the money and that if I can't pay, I need to call them and tell them why so maybe they can help me.

The second letter... At the top, it says "Final Notice Before Foreclosure Review".

I'm not sure what a "foreclosure review" is as I have never seen anything referred to as this. I will search the forums a bit and see what I can find, but basically the letter says "We have already written to you several times to tell you that we have not received your home payments." Then the next underlined part about how I may lose my home... Gives me an address to send the check. If I can't pay, I need to call, they may be able to help me. Then it says that if they do not hear from me, they will begin acceleration and foreclosure. "Once this happens, we may not be able to help you and you will probably lose your home."

They give me some options:
I could sell my home before they accelerate and foreclose.
I could contact another lender to refinance my debt.

Then it goes on to say that if they foreclose and sell my home:
You will be charged for all the subsidy that you have received since you obtained the loan
You will be responsible for any remaining debt after the sale
Your wages could be garnished
Your Federal Income Tax refund could be used to pay your debt
Your credit rating will be damaged.

So, that's that.

If I proceed with this, I will need to declare bankruptcy, that part is obvious.

But if they were trying to scare me, I guess they did. It finally feels real now. I was hoping I would fall through the cracks for months and months like some of you before they accelerated my account, etc. but it looks like they are pretty on the ball. I live in a judicial state so I still think it would take at least a year from date of last payment, but to declare bankruptcy and wreck my credit and everything that goes along with foreclosure (publishing it in the papers, embarassing my teenagers, etc) I was hoping for a whole lot longer than a year.

So now I am wondering if this is something I should be doing right now. My son is in his senior year of high school... do I want to be dealing with the stress of all of this while also trying to be emotionally present during this huge transition in our lives? Am I making a huge mistake? I have always been so responsible with money; this whole thing feels very foreign to me but I was ready to do it and now I feel unsure.

I really really wish there were other USDA borrowers on here who I could gain some insight from. I feel like I'm really going it alone here.
USDA loans are not very common, as you no doubt know. There are not that many people on this forum discussing regular loans, so the odds of USDA loanholders being active is near nil.

If you haven't done so already, try going to Google Scholar and reading legal opinions involving USDA loans and foreclosure. You can learn a lot reading cases.

https://scholar.google.com/scholar?as_sdt=6,31&q="usda"+++"foreclosure"&hl=en&as_ylo=2012

There are 149 of them since 2012 and 477 cases in total.
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Aug 31, 2017
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#15
Rural development has mainly three components , they are economic, social and environmental. Government should take the measures to help the rural area people. Development totally depends on an individual, so all must come together to help the needy people. You check it out here, even how nonprofit organizations are taking efforts for the rural development by providing the essential things.