This is what I just wrote to Senator Baldwin, subcommittee on Appropriations for Rural Development,
“From top to bottom, the Agency, known as Centralized Servicing Center for USDA-Rural Development, is rancid with incompetence. Only a thorough overhaul will begin to address the problems of mismanagement to change the lack of accountability that is ingrained in the Agency’s ineptitude of knowing how to manage mortgage loans.
No monies should be allocated to CSC until educated on the proper application of the rules and regulations that govern USDA-RD loans, along with the appropriate accounting procedures."
Here are some tips from someone who has been dealing with them since 1980: Never talk to them on the phone, always use a paper trail. Save all payment documents. Get a yearly printout of your account to make sure all payments are applied and the proper interest has been reported on your 1098's or YTD billing statements. Save every document you send and get from CSC. Know the handbook rules that apply to your situation and also read RESPA on error resolutions and know how to write a QWR. The National Housing Law Project has some good information, use it and know what laws apply to your situation. Find a daily simple interest calculator, found mine free online, and check the accounting. Learn how to calculate the ICA's. Do not trust anything they tell you without verification. Ask them were the rule is in the handbook for that decision. Know where every subsidy payment was applied. Remember subsidy can only be applied to interest since 1990. That subsidy you are getting will have to be paid back. Basically, you are renting from USDA-RD, and you never own the house. Once it is paid, the subsidy is still owing.
All I can tell everyone right now is for the past 19 years, CSC has made my life a living hell with lost payments, lost records, set up an escrow without my permission, went five years with no contact, incorrect interest, all ICA's are incorrect, eleven different spreadsheet from CSC on my account and they are all incorrect after a number of audits and they refuse to correct the mistakes. Hell I have four different balances from them for the same date. My loan has been paid off since 2002 and they will not admit it.
Everyone should get a moritorium which mean no deficiency judgment if they foreclose. Most lenders offer moritoriums, not just USDA-RD.
I have a question and I posted this on different posts here but I am being told that once your application is approved that you have 45 days to find a home AND close on it. You can also request 2 extensions I am told. I thought the 45 days/2 extensions referred to finding and house and signing a contract...not completely closing on it. I am looking at a new construction condo so there is no way it will be done in 45 days if they just started building it right now. Just confused...
They are construction friendly. As another poster said, the 45 day limit is to find a home and be under contract. You can be under contract to build within this time. The builder will propose a construction cycle and completion date to USDA. Your loan will be committed and the builder will receive periodic draws against your loan. I am not completely literate when it comes to their construction process however this is information I believe to be correct based on their handbooks.
Wis204, I am very sorry to hear that you have had such a difficult time with the CSC. With any large agency, especially a government agency, there always carries the risk of mismanagement and errors.
What I have found to be the case however does run contradictory to your experience. All of my billing statements have been correct, my payments have been applied as they should, my escrow is correct, and the years I have received a subsidy I was informed of the amount of subsidy I received.
I do take issue with the statment of renting from the USDA. When these loans are taken out you are informed that there is a subsidy. You are also informed and you sign an agreement that there is a subsidy recapture when the title to the home is transferred or you refinance. There are ways through their program to minimize the recapture and the recapture is capped at a certain amount of equity. Regarding the subsidy, loans made after 1990 have a note rate and are eligible for a subsidy to lower your payment. The government is not giving you this money. You fully owe it, however at the time you are not paying it because your income or circumstances will not allow for it. If you accept a subsidy for the duration of your mortgage, you will owe a final balance for the subsidies you have received and not paid. If you were to finance your home through a traditional lender you would have paid this amount every month.
Keep in mind that while these loans can be a lifesaver for a lot of people and they do open the door to affordable homeownership, each month you accept the subsidy you are tallying a balance which must be repaid. Unless you are absolutely destitute and have no hope for your future income rising, your long term goal should not be to hold a USDA Rural Direct loan for the entire 30-38 year period. Once your income is stable and once you have equity in your home, you should refinance your mortgage with another lender. If you cannot refinance or simply don't want to, you can opt out of the subsidy. Currently I receive no subsidy. I pay my mortgage payment, escrow, and the full note rate of 4%. I owe around $4,000 in subsidy that will be recaptured when I sell or refinance.
Here's the rub for me - I cannot refinance because I don't earn enough income to fit in with a traditional mortgage lender's debt to income ratio based on my current balance. With the exception of a sickness and losing my job for several months, I have never had difficulty paying my mortgage even at the note rate. Once I have paid on my home for another three to four years I will be able to refinance because then I will be within the DTI ratio for a traditional lender. My home has appreciated since I purchased it and when I do refinance I will be able to continue to avoid paying any kind of mortgage insurance because of my loan to value.
You mentioned a subsidy is due if the home is sold or refinanced. What if the loan balance is just paid off? and the owner still lives in the home, but doesnt refinance?
thank you for your help