The U.S. Department of Agriculture (USDA) has readjusted its policy for collecting money owed to its Rural Housing Service by borrowers in foreclosure.
The Wall Street Journal reports that the USDA will no longer pursue borrowers for unpaid loan balances after foreclosure if the borrowers are able to prove they are unable to repay the debt. The U.S. Department of the Treasury collected $45 million in delinquent USDA mortgage debt from borrowers in fiscal year 2011; in fiscal year 2007, at the start of the housing crisis, the Treasury collected up to $23 million. By the end of fiscal year 2011, $779.2 million in delinquent USDA mortgage debt had yet to be collected.
The new policy applies only to loans issued or guaranteed by the USDA after Oct. 22, 2012. As a result of the policy change, the USDA says that it will be able to resell foreclosed homes at a faster pace. The policy change also matches procedures at other federal agencies where borrowers are not pursued for debt left after foreclosure.
‘After an extensive review of its debt-collection policies, USDA concluded that it could decrease the administrative burden on Treasury by writing off post-liquidation balances for those who cannot pay them,’ says a USDA spokesperson.
The USDA's Rural Housing Service guaranteed $16.9 billion in loans in fiscal year 2011 while issuing $1.1 billion in direct loans.
