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Profile picture for roxy35

What happens if USDA loan goes to foreclosure?

My wife and I may be forced to lose our home to foreclosure, but we are weighing our current options to see what route is the best to take.

We live in NC which to my understanding is a non-recourse state.  I have read up a little on what this means, but have not yet sat down with an attorney to go over details specifically.  To my knowledge, this means in foreclosure a bank can only take back the house and cannot come after the buyers assets.  However, we have a USDA loan on this property.   How do things change with this type of loan?

I know the government will reimburse the lender the loan (that is by definition part of the program), but will the government then come after us?  We understand that foreclosure will greatly damage our credit (which stinks because we have spent time building it up, both of us are over 800), but we are OK with it and will rent (or live with family) until we can get back on our feet.  We are young (both are 26) and have no children yet.

This is just to get some basic information on what we can expect to happen if we do in fact default on our USDA loan.  I cannot find ANY information related to this online but assumed there would at least someone on here with this specific expertise.

Thanks!
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July 11 2011 - US
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Answers (8)

Profile picture for dndabbott04
For those that have experienced the wonderful "generosity" of the USDA (insert sarcasm) I am curious as to how the process happened for you. We received a normal letter in the mail on Saturday with a demand for payment. We are going to consult a real estate lawyer, but our main concern right now are the taxes that we are getting ready to file. Will they seize this years taxes so soon after the initial demand for payment, or give us time to respond? Just curious how the process looked for all that have or are going through it. Thanks!
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February 20
Profile picture for TiffanyGreen9
Maybe you can do a "deed-in-leu of foreclosure." This is when you voluntarily give back your property to the lender. This is less damaging to your credit as a foreclosure. Try calling a housing counseling agency in your area. You can find one by calling 1 (800) 569-4287. Or try a pre-foreclosure sale. You'd still owe money but not as much.
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August 22 2013
Profile picture for roxy35
We've been able to keep home for the past year but have now been forced to take jobs 400 miles away.  We have tried to sell for whole year but with no luck, despite dropping price below competition.  We are debating renting or just letting it go....Any advice if USDA will garnish wages, if so, how much they can/will garnish?  
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June 13 2013
Profile picture for DaniellLind
Yes, They are coming after me now. Its been two years and now that Im getting back on my feet again I make to much for chapter 7. I dont understand why as its really the same type of loan as a FHA. My lawyer says garnishment may be cheeper than a chapter 13 payment plan. What a nightmare. I live in AZ and were are Suppose to be non -recourse also.
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June 04 2012
Profile picture for BrandiMiller Hays
Was this a Rural Housing loan through the USDA? If it was, they will come oafter you for the deficiency.My husband and I are going through this now. Our 242,000 home was foreclosed and sold for 90,000. The USDA is now garnishing his wages for the deficiency of 140,000! So in essence we are paying 140,000 for a house we will never own. Be very very careful. I'd definitely consult an attorney if you can afford it.
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March 23 2012
Profile picture for roxy35
Does that mean I won't be able to purchase another home at all until it's paid off, or I just won't quality for another government loan (USDA, FHA)?

Will CAIVRS garnish wages or take me to collections?  This is our only home and our first home.
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July 15 2011
The USDA RDL is no different than a FHA or VA loan. The upfront  Guarantee Fee you paid or financed into your loan covered the down payment you would have normally made in a typical government insured FHA loan. What will happen is, you will be reported to the Federal Credit Alert System (CAIVRS) and be unable to purchase another home until that portion of what the FEDs paid to the lender is repaid. As far as any other actions, I don't see anything that will cause you to have any further problems, unless you have a non-purchase 2nd T.D.


Best of Luck!
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July 14 2011
Profile picture for roxy35
bump.


Anyone have experience with this issue or these types of loans?
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July 12 2011
 
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