Update: HAC’s letter to the editor was published in the Wall Street Journal on June 4 and is available here.
On Friday, May 25, 2012, the Wall Street Journal published an article headlined “USDA is a Tough Collector When Mortgages Go Bad.” It describes USDA’s efforts to collect from borrowers under the Section 502 guarantee program who lost income in the recession and then lost their homes to foreclosure.
The article is available in PDF here. (On the Journal’s site, the full text is accessible only to subscribers.)
Comments posted online on the Journal’s site as of mid-afternoon Friday are available in PDF here. A comment from Robert Rapoza, Executive Secretary of the National Rural Housing Coalition, appears near the end.
HAC responded with the following letter to the editor.
wsj.ltrs@wsj.com
The Editor
The Wall Street Journal
1211 Avenue of the Americas
New York, NY, 10036
To the Editor:
“USDA is a Tough Collector When Mortgages Go Bad” (May 24) describes serious problems, but fails to recognize the positive achievements of USDA’s rural housing programs. The debt collection practices described in the article should be corrected, but this does not mean – as some of the online commenters suggest – that USDA should be taken out of the mortgage business.
To qualify for USDA’s direct mortgage program, families must have low incomes; to qualify for the guarantee program, they must have low or moderate incomes. Yet USDA’s delinquency and foreclosure rates are comparable to those of other lenders and guarantors.
It is not surprising that some of USDA’s borrowers have been affected by the recession. It may be more surprising that a far greater proportion are successful homeowners, despite their income levels. The article reports that 12 percent of USDA’s guaranteed loans and 17 percent of its direct loans are delinquent or in foreclosure. In other words, 88 percent of the guaranteed loans and 83 percent of the direct loans are in good standing.
Those rates represent more than half a million homeowners with USDA guarantees and more than 230,000 with USDA direct loans, in addition to the one million or so who have already paid off their USDA mortgages. All those borrowers turned to USDA because they could not receive standard loans from the private market, and succeeded as homeowners despite their low incomes.
While we find ways to improve USDA’s treatment of its borrowers facing defaults and foreclosures, we should also celebrate its successes and embrace its future.
Moises Loza
Executive Director
Housing Assistance Council
Washington, DC
Posted: May 26, 2012
Updated: June 7, 2012
Polly Nichol, Director of Housing Programs at the Vermont Housing & Conservation Board and President of the Board of Directors of the Housing Assistance Council, was a featured panelist at a June 25 forum of the Bipartisan Policy Center’s Housing Commission in Bar Harbour, Maine. Her testimony is available here. Hosted by former Senator George Mitchell, the forum is part of the blue-ribbon Commission’s effort to develop long-term strategies for the nation’s housing.
