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April 1, 2013: USDA Limits Debt Collections from Rural Low-Income Homeowners; NHLP and HAC Encourage USDA to Stop All Collections
RURAL HOUSING EXPERTS PRAISE
NEW USDA MORTGAGE COLLECTION LIMITS
April 1, 2013 - The U.S. Department of Agriculture has announced that it will limit efforts to collect funds from some rural homeowners after foreclosure. Advocates say that, while this is good news for thousands of families whose mortgages were financed or guaranteed by USDA, these concessions will not provide relief to those against whom the department has already commenced collection actions. Moreover, they will not apply to borrowers USDA believes have the resources to repay losses incurred by the department.
“It does not make sense,” says Gideon Anders, senior attorney at the National Housing Law Project, “for the federal government to continue to cause a hardship to families who have lost their homes due to circumstances beyond their control when this country has undergone a major financial and foreclosure crisis over the past five years.” The National Housing Law Project and the Housing Assistance Council pressed USDA to change its collection policies.
The change applies to USDA programs that provide lower income families with an opportunity for homeownership through mortgages financed directly or guaranteed by the department. Since 1949, over 3 million low-income families in rural America who otherwise could not qualify for home loans have purchased homes under these very successful programs.
Because of the recent economic and foreclosure crisis, thousands of USDA borrowers, many with low and very low incomes, have lost their homes to foreclosure. When the homes are sold at foreclosure sales, the amount recovered may not be enough to cover the remaining loan balance. USDA, working with the Treasury Department, has made efforts to collect the shortfall from its borrowers. It uses collection techniques not employed by any other federal housing agency and rarely used by private lenders, including the full capture of income tax refunds, partial garnishment of wages, and partial offset of federal benefits such as social security payments. These collections are conducted administratively without resort to the courts.
“In some cases the amounts USDA wants to recover are over $100,000,” Anders explained. “These families have already experienced hardships that caused them to lose their homes. Typically someone has lost a job, incurred high medical costs because of an illness or injury, or even died. In many instances, the shortfall of recovered loan amounts is due to the significant drop in real estate values over the last five years.”
Rural housing experts at the National Housing Law Project and the Housing Assistance Council have worked with many affected households. In addition to uniting housing advocates nationally to protest USDA’s collection practices, Anders and HAC Executive Director Moises Loza have met personally with top USDA administrators.
“USDA is to be commended for halting these collection practices with respect to newly foreclosed borrowers,” Loza stated, “and bringing immediate financial relief to tens of thousands of rural families. I hope USDA will reconsider its decision for borrowers who are already having their wages, benefits and tax refunds offset.”
NHLP is considering filing a lawsuit against USDA to stop the agency’s collection practices against these former homeowners.
The Housing Assistance Council, founded in 1971, is a nonprofit corporation that supports the development of rural low-income housing nationwide. HAC provides technical housing services, loans from a revolving fund, housing program and policy assistance, research and demonstration projects, and training and information services. HAC is an equal opportunity lender.
The National Housing Law Project is a nonprofit national housing and legal advocacy center established in 1968. Its mission is to advance housing justice by advocating for affordable housing, litigating to uphold homeowners’ and tenants’ rights and offering technical assistance to legal aid attorneys who work with low-income families.
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