Hello - my name is Zhanna - I am a CPA and a Real Estate Investor/Broker. I have a suggestion with respect to the USDA - USDA Direct and Subsidized Mortgages. Right now - the program is a total mess:
- Loans are being given to people who cannot afford them.
- Loans are given with zero percent down - with no skin in the games - people walk away from these properties during times of distress.
- Once a borrower defaults - there is no timely foreclosure.In fact - throughout all of the US - there are only a handful of foreclosures even though there are thousands of actual properties in default.
- Some people have the debt from the mortgage on their credit forever - and these are very low income people. The USDA garnishes their wages, social security checks and federal refunds indefinitely.
- These abandoned homes are an eyesore for the community and a breeding ground for squatters as well as illegal activity.
Case in point - here is what happened to one property I acquired. My husband and I purchase properties to renovate and resell [flip]. We purchased a property from a NJ sheriff’s auction - the property was foreclosed due to an outstanding HOA lien. We were aware of the original mortgage and HELOC - but we were not aware that neither have been paid in twenty-two years. We determined this fact by requesting the payoff statement from USDA. In fact, the owner has not paid the mortgage, property taxes, insurance or the HOA in twenty-two years yet USDA never foreclosed. This particular mortgage is passed the NJ statute of limitations but others are not.
Why does the USDA never foreclose:
- Foreclosures look bad for government statistics.
- Foreclosures are very costly.
- These properties are mostly abandoned, in disrepair and under-water.
What should be done? Here are some ideas:
- Foreclose on all outstanding homes and resell them on the open market.
- Stop giving out loans to people who cannot afford them - this is a waste of government resources.
I hope this suggestion gets to Elon Musk’s DOGE Advisory Committee.