• Go to page :
  • 1 2
  • Text Only
Voting History
rated:
The difference in how foreclosures are being handled among our government agencies is insane. Fannie and Freddie are helping borrowers by restructuring their mortgages. Private lenders are being pressured to help underwater homeowners, yet the USDA, a government agency who provides loans to rural homeowners, seized a $2900 tax refund and garnished a portion of the social security checks of a 71 year old man who is on food stamps, and taking odd jobs to make ends meet, and whose wife is terminally ill.

The first couple paragraphs of the article are posted below. You can read read the entire article here:


"Charles Ward fell behind on his mortgage in September, just as his late wife began a losing battle with lung cancer and her medical costs soared.
His lender seized his $2,958 federal tax refund and has taken a $131 bite from each of his last four monthly Social Security checks.

"What little money I had saved up has just disappeared," says Mr. Ward, a 71-year-old former truck driver who bought his $128,000 home in Nelsonville, Ohio, in 2008. He receives about $200 a month in food stamps and takes on odd jobs to make ends meet.

Mr. Ward's lender isn't a bank. It is the U.S. Department of Agriculture's Rural Housing Service, which provides mortgage loans to rural homeowners and guarantees loans made by banks."

Unlike private firms, the USDA doesn't need permission from a court to start collecting on unpaid debts. It can in some cases seize government benefits and tax refunds before a foreclosure is completed. After foreclosure, the USDA can go after unpaid balances, even in states that limit such actions by private lenders.A USDA spokesman says the agency follows all federal and state laws.

The Treasury Department collected $45 million in delinquent USDA mortgage debt from borrowers in the last fiscal year, up from $23 million in fiscal 2007. At the end of fiscal 2011, $779.2 million in delinquent USDA mortgage debt was awaiting collection, up from $420.7 million in 2007.


Edited to add the following link which still has the entire article, as well as a few other explanatory paragraphs should the article be removed:

WSJ Online

"Since 2003, the USDA has required borrowers who take out a guaranteed loan to sign a form acknowledging the agency "will use all remedies available" to collect unpaid debt.

The Federal Housing Administration and Veterans Administration, which also guarantee mortgage loans issued by private lenders, say they generally don't pursue borrowers for debt left after foreclosure. "We'd gain nothing by placing an even greater debt burden on the borrower," an FHA spokeswoman says.

The VA says Congress in late 1989 enacted legislation preventing it from collecting deficiencies, except in cases of "fraud, misrepresentation or bad faith on the part of the veteran."

Some borrowers now say they didn't know what they agreed to when they signed the USDA form. "It was a shock when I got the note that they were going to garnish my Social Security check," says Jeanne Marie Andersen, a 74-year-old widow who lives in Lake Crystal, Minn., and took out a USDA loan in 2007....

The Treasury Department handles USDA collections of delinquent debt. Its arsenal includes taking tax refunds, seizing up to 15% of Social Security payments and garnishing up to 15% of a borrower's take-home pay. It can also tack on up to 28% to cover collection costs"

Member Summary
Most Recent Posts
It's 'God giveth and the government taketh away'.

Just another elderly person being screwed by the system, nothing to see... (more)

BitemeIamtoxic (Jun. 04, 2012 @ 10:52p) |

The key point here is that you need income. If you don't have any assets and next to no income, you probably wouldn't ge... (more)

henry33 (Jun. 04, 2012 @ 11:43p) |

Yes, this is the operative point. This guy didn't deserve the below-market loan and should have been a renter to begin w... (more)

arktc (Jun. 05, 2012 @ 5:15p) |

Thanks for visiting FatWallet.com. Join for free to remove this ad.

now there's a cash cow mooo

Seems what they did wrong here is not kicking the old couple to the curbs prior to garnishing their returns and distributions. Shame on the USDA for a screw up like that.

It's shit like this that makes me boycott agriculture.

Sounds like a great idea to me.

rightfully so.... and in the last few years the loans they've taken have increased dramatically, so we will see.

Just another reason to owe at tax time.

Is it possible because

1) Government subsidizes USDA loans, so they are paying a lower rate than they'd get in the private market
2) No one in private market would issue these loans because they are more likely to fail

They are only taking distributions *from the government* away to pay back a loan subsidized and given out *by the government*. Not kicking them out of their house or raiding their savings.

And, the wife should qualify for Medicaid to help with her medical bills.

bighitter said:   The difference in how foreclosures are being handled among our government agencies is insane. Fannie and Freddie are helping borrowers by restructuring their mortgages. Private lenders are being pressured to help underwater homeowners, yet the USDA, a government agency who provides loans to rural homeowners, seized a $2900 tax refund and garnished a portion of the social security checks of a 71 year old man who is on food stamps, and taking odd jobs to make ends meet, and whose wife is terminally ill.
........


strictly speaking, Fannie and Freddie are not government agencies while USDA is.

With these sob stories, I always wonder why people think it's the responsibility of the lender to bare the burdon of the borrower's bad luck. We criticize lenders for every little mistake they make (even though the mistakes are irrelevant to the borrower having not paid as agreed), yet are now also criticizing them for following the rules to the T.

I also wonder how someone with no income besides SS had such a large refund coming to them? Most people in their situation would have zero withholding and zero tax due. I guess if he had "odd jobs" they may have withheld something if he was a w2 employee, but it wouldn't add up to anywhere near that.

awstick said:   I also wonder how someone with no income besides SS had such a large refund coming to them? Most people in their situation would have zero withholding and zero tax due. I guess if he had "odd jobs" they may have withheld something if he was a w2 employee, but it wouldn't add up to anywhere near that.

Churning credit card tax payments?

sounds about right - agency that shouldn't be doing this, gives loan to someone that shouldn't be getting one. when default happens, has the right to take $ back. god bless america

Where's the old fatwallet cry of "Pay your bills deadbeat."?

Anyway sounds pretty brutal, usually with just social security income, they're usually judgement proof because lenders can't garnish social security income. Unless they're a government agency. I think USDA is one of the few lenders that still do 100% financing.

Glitch99 said:   With these sob stories, I always wonder why people think it's the responsibility of the lender to bare the burdon of the borrower's bad luck. We criticize lenders for every little mistake they make (even though the mistakes are irrelevant to the borrower having not paid as agreed), yet are now also criticizing them for following the rules to the T.

I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?

good, you default on a mortgage, just like any other debt they can get a judgement against you and take your crap. just like it should be, standing applause

The government giveth and the government taketh away.

bighitter said:   Glitch99 said:   With these sob stories, I always wonder why people think it's the responsibility of the lender to bare the burdon of the borrower's bad luck. We criticize lenders for every little mistake they make (even though the mistakes are irrelevant to the borrower having not paid as agreed), yet are now also criticizing them for following the rules to the T.

I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?

Can the private lenders legally garnish tax refunds? If the answer is no then it it a moot comparison.

nycll said:   bighitter said:   
I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?

Can the private lenders legally garnish tax refunds? If the answer is no then it it a moot comparison.


Why, in your opinion, is it a moot comparison? Is it merely because the government’s remedies for pursuing defaulting mortgage borrowers are expanded under the USDA mortgage contracts?

bighitter said:   Glitch99 said:   With these sob stories, I always wonder why people think it's the responsibility of the lender to bare the burdon of the borrower's bad luck. We criticize lenders for every little mistake they make (even though the mistakes are irrelevant to the borrower having not paid as agreed), yet are now also criticizing them for following the rules to the T.

I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?
Yeah but its what you signed up for. Every legal arrangement has the rights of the parties, per law. People need to be aware of the implications. In a lot of places you don't have to be too far from city center to use USDA loan. Its not just farming communities. Think exurb.. Its been used as a path of least resistance recently, that's why you have the surge over the last few years.

henry33 said:   Where's the old fatwallet cry of "Pay your bills deadbeat."?

Anyway sounds pretty brutal, usually with just social security income, they're usually judgement proof because lenders can't garnish social security income. Unless they're a government agency. I think USDA is one of the few lenders that still do 100% financing.


Pay your bills deadbeat. Or at least stop bitching that you have to pay 130 a month for housing. I'm so sick of old people and their greed. Get a job like the rest of us and STFU.

JaxFL said:   Yeah but its what you signed up for. Every legal arrangement has the rights of the parties, per law. People need to be aware of the implications.
I agree entirely with your statement. I assume you agree that the right to enforce contractual agreements should apply equally to both private and public lenders. If the government is going to aggressively enforce collections (which is their right under their USDA mortgage contract), shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?

bighitter said:   JaxFL said:   Yeah but its what you signed up for. Every legal arrangement has the rights of the parties, per law. People need to be aware of the implications.
I agree entirely with your statement. I assume you agree that the right to enforce contractual agreements should apply equally to both private and public lenders. If the government is going to aggressively enforce collections (which is their right under their USDA mortgage contract), shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?
sure its entirely with in their rights. Whether they exercise those rights is up to them. Just bc the hammer hasn't hit the nail yet, doesn't mean it won't. The re is talk of the sale of defaulted loans loans in bulk, to those who can pursue those borrower's I believe .they have 5yrs or so to come after you in those states that allow. The ink isn't dry yet and money to be made.

However given the losses of fnma..., and gov't, it may be just absorbed... Not sure of the chain and legalities. It may prolong and exacberate the problems right or wrong.

bighitter said:   JaxFL said:   Yeah but its what you signed up for. Every legal arrangement has the rights of the parties, per law. People need to be aware of the implications.
I agree entirely with your statement. I assume you agree that the right to enforce contractual agreements should apply equally to both private and public lenders. If the government is going to aggressively enforce collections (which is their right under their USDA mortgage contract), shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?

I agree. Those private sector banks should also be free to deal with the effects of writing loan contracts with falsified information, or offering loan products to unqualified applicants, without government meddling in the form of massive bailouts.

Actually, the government "pressure" for banks to modify loans is almost a non-issue, as there is little leverage to force the banks to actually do much, and predictably, they haven't ...

as well they should !!!!!!!!!

why on earth would he be buying new home at age 67, and not just rent?
as much as I hate to say this, I have no sympathy for the couple.. nor USDA in this case.

bighitter said:   nycll said:   bighitter said:   
I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?

Can the private lenders legally garnish tax refunds? If the answer is no then it it a moot comparison.


Why, in your opinion, is it a moot comparison? Is it merely because the government’s remedies for pursuing defaulting mortgage borrowers are expanded under the USDA mortgage contracts?
Simply because without a heavier stick (like tax refund garnish), the lenders' best option is not foreclosure. Loan mods and short sales will net them significantly higher value of the defaulted loans.

shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?This might be where your (or my) misunderstanding is. All the mortgage modification laws are just encouragements. Nobody's rights to enforce their contracts are taken away from them. Remember they never had the rights to garnish people's tax refunds. A more comparable case is the non-bankruptcy dischargeability of private student loans; they are still not discharge-able.

Revike said:   bighitter said:   JaxFL said:   Yeah but its what you signed up for. Every legal arrangement has the rights of the parties, per law. People need to be aware of the implications.
I agree entirely with your statement. I assume you agree that the right to enforce contractual agreements should apply equally to both private and public lenders. If the government is going to aggressively enforce collections (which is their right under their USDA mortgage contract), shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?

I agree. Those private sector banks should also be free to deal with the effects of writing loan contracts with falsified information, or offering loan products to unqualified applicants, without government meddling in the form of massive bailouts.

Actually, the government "pressure" for banks to modify loans is almost a non-issue, as there is little leverage to force the banks to actually do much, and predictably, they haven't ...


Notwithstanding the fact that all banks didn't receive bailout funds -- and that some banks who did agree to take bail-out funds were strong-armed by Treasury Secretary Paulson to do so -- I agree that banks should have to eat their own cooking. Unlike the auto industry who also received significant bailout funds. The banks should shoulder the losses in their portfolios caused by their foolish loan underwriting, but they, and they alone, should resolve those problems, not the government.

We have an enormous backlog of foreclosures in the pipeline in California yet foreclosure sales actually completed in the past year have slowed to a trickle on a percentage basis. You state, "Actually, the government "pressure" for banks to modify loans is almost a non-issue, as there is little leverage to force the banks to actually do much, and predictably, they haven't ...." Could you point me to your data source on the number of modifications completed to date?

nycll said:   bighitter said:   nycll said:   bighitter said:   
I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?

Can the private lenders legally garnish tax refunds? If the answer is no then it it a moot comparison.


Why, in your opinion, is it a moot comparison? Is it merely because the government’s remedies for pursuing defaulting mortgage borrowers are expanded under the USDA mortgage contracts?
Simply because without a heavier stick (like tax refund garnish), the lenders' best option is not foreclosure. Loan mods and short sales will net them significantly higher value of the defaulted loans.

shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?This might be where your (or my) misunderstanding is. All the mortgage modification laws are just encouragements. Nobody's rights to enforce their contracts are taken away from them. Remember they never had the rights to garnish people's tax refunds. A more comparable case is the non-bankruptcy dischargeability of private student loans; they are still not discharge-able.


NYCLL, I agree that the best option for a lender is typically a short sale, and in some cases, a loan modification might ultimately achieve a higher net recovery than a short sale. I am not aware of any “laws” that require lenders to modify loans. However, several laws have been enacted recently that slow the foreclosure process to a crawl. Some of these laws are on the state level. Federal bank regulators do have many tools at their disposal (arbitrary classification of loans, etc) that they can use to “persuade” banks to adhere to the administration’s desire to see loans modified.

I think the lender should have the right to collect their money. The private lender and USDA should not loan the money who people who could NOT put 20% down for the mortgage.

bighitter said:   nycll said:   bighitter said:   nycll said:   bighitter said:   
I’ll admit that I am sympathetic to old people in a farming community having their social security checks garnished. However, my point was that it is ironic that a government agency (USDA) takes the position that they have every right to seize tax refunds and garnish social security payments of non-paying borrowers. Yet, at the same time, the government is exerting pressure on banks to modify mortgages through principal reductions, lower interest rates, etc. for what many Fatwalleter's call "dead beat borrowers" In other words, the government thinks it is OK for private sector banks and their investors to absorb losses incurred from modifying mortgages, but the government isn't willing to absorb the same losses. Do you see the hypocrisy here?

Can the private lenders legally garnish tax refunds? If the answer is no then it it a moot comparison.


Why, in your opinion, is it a moot comparison? Is it merely because the government’s remedies for pursuing defaulting mortgage borrowers are expanded under the USDA mortgage contracts?
Simply because without a heavier stick (like tax refund garnish), the lenders' best option is not foreclosure. Loan mods and short sales will net them significantly higher value of the defaulted loans.

shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?This might be where your (or my) misunderstanding is. All the mortgage modification laws are just encouragements. Nobody's rights to enforce their contracts are taken away from them. Remember they never had the rights to garnish people's tax refunds. A more comparable case is the non-bankruptcy dischargeability of private student loans; they are still not discharge-able.


NYCLL, I agree that the best option for a lender is typically a short sale, and in some cases, a loan modification might ultimately achieve a higher net recovery than a short sale. I am not aware of any “laws” that require lenders to modify loans. However, several laws have been enacted recently that slow the foreclosure process to a crawl. Some of these laws are on the state level. Federal bank regulators do have many tools at their disposal (arbitrary classification of loans, etc) that they can use to “persuade” banks to adhere to the administration’s desire to see loans modified.

The reason the foreclosure process was slowed to a crawl was because the deadbeats' rights were actually violated due to robosigning and other sloppy bank processes. The degree of slowdiwn varied greatly from states to states. And it is largely settled as far as I know. I am sure if the USDA's practice is found to violate deadbeats' rights then it will be halted. But until then ...

GOOD

The actual number of modifications carried out since the introduction of federal programs is something like 10% of the number that was predicted/hoped for. I talk to homeowners on a regular basis, who tell of the process dragging out for 10, 12, 14 months, often ending with a denial of their application. Their communication with their bank is sometimes mind-boggling - based on the snail's pace and the fumbling around, you'd think it was the first time the bank had ever done a loan modification in their entire history. It is abundantly clear that most banks have given this their lowest possible priority ...

Anyway, USDA is a governmental agency, and this is similar to the right of offset banks have.

bighitter said:   Revike said:   bighitter said:   JaxFL said:   Yeah but its what you signed up for. Every legal arrangement has the rights of the parties, per law. People need to be aware of the implications.
I agree entirely with your statement. I assume you agree that the right to enforce contractual agreements should apply equally to both private and public lenders. If the government is going to aggressively enforce collections (which is their right under their USDA mortgage contract), shouldn’t private sector banks be afforded the same rights to enforce their contracts without government meddling?

I agree. Those private sector banks should also be free to deal with the effects of writing loan contracts with falsified information, or offering loan products to unqualified applicants, without government meddling in the form of massive bailouts.

Actually, the government "pressure" for banks to modify loans is almost a non-issue, as there is little leverage to force the banks to actually do much, and predictably, they haven't ...


Notwithstanding the fact that all banks didn't receive bailout funds -- and that some banks who did agree to take bail-out funds were strong-armed by Treasury Secretary Paulson to do so -- I agree that banks should have to eat their own cooking. Unlike the auto industry who also received significant bailout funds. The banks should shoulder the losses in their portfolios caused by their foolish loan underwriting, but they, and they alone, should resolve those problems, not the government.

We have an enormous backlog of foreclosures in the pipeline in California yet foreclosure sales actually completed in the past year have slowed to a trickle on a percentage basis. You state, "Actually, the government "pressure" for banks to modify loans is almost a non-issue, as there is little leverage to force the banks to actually do much, and predictably, they haven't ...." Could you point me to your data source on the number of modifications completed to date?


Most banks has already paid all the funds back anyway.

Why would a 67 year old man (in 2008) be buying a new house? Did he actually anticipate living another 30+ years to pay off the mortgage?

i guess the bank put a rod to their head and forced them to sign all 175 papers....

note to Public...PAY YOUR DAMN BILLS

Why would a 71 year old man with no income buy a $128k house? and why would he be allowed to? I'm afraid I'm in the PYBD crowd, the fact that he's 71 and his wifes's dying and the crick dried up and chicken got dysentry doesn't have any bearing on the mortgage at all. Pay, sell, or walk away and leave the keys in the mailbox. If 71 year olds don't have to pay their bills, why would any 71 year old do so?

Anyone else see any irony in this guy getting a social security check and $200 in food stamps and then complaining about the government taking away his money to repay his heavily subsidized government loan?

Skipping 5 Messages...
tumements said:   I think the lender should have the right to collect their money. The private lender and USDA should not loan the money who people who could NOT put 20% down for the mortgage.


Yes, this is the operative point. This guy didn't deserve the below-market loan and should have been a renter to begin with and should be a renter now, and he may have even saved money being one. Financially, it made more sense for a 67-year old not to buy a $128,000 house with a low-down payment 30-year loan, since he didn't have much equity in it and because anything that went wrong with the house would be a big blow to his non-existent income/savings that he couldn't absorb. The whole concept of a 30-year loan as we know it is to serve as forced savings over 30 years, and given that this guy is close to retirement, he is out of the savings phase and in the consumption phase. Bad lending decision, bad purchasing decision, there's plenty of blame to go around.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014