The U.S. Department of Agriculture insures mortgages issued by lenders and does not directly foreclose on properties since the agency does not provide the actual financing. However, lenders who provide the financing submit claims on foreclosed properties secured by the USDA for the unpaid balance, and the USDA pays the deficiency, explains SFGate Home Guides.Continue Reading
Under the Debt Collection Improvement Act of 1996, the U.S. Treasury Department pursues all remedies available under the act to collect the deficiency and fees, according to SFGate Home Guides. If borrowers remedy their defaulted loan through short sales with lenders, they must still pay the deficient amount to the USDA. The U.S. Treasury Department can start the collection process immediately, and the agency can seize government benefits and tax refunds.
When borrowers miss three consecutive payments on USDA loans, they fall into default status. When this occurs, the lenders that secured the financing may threaten to foreclose, according to SFGate Home Guides. Although the USDA and the lenders use a complicated process for the foreclosure process, borrowers experience the process in the same way as the foreclosure process on typical mortgage loans. If borrowers cannot work out repayment arrangements with their lenders, foreclosure proceedings usually begin.Learn more about Credit & Lending