USDA Rural Housing Loans


USDA Rural Housing Loans

Here's information to help with USDA short sales

Members: 42
Latest Activity: Oct 10

USDA Short Sale Information


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These loans are handled through the servicer. Just check to see how they are handling the submission.

In order for a loan to be considered for a pre-foreclosure sale, the loan

must be in default (delinquent) for more than 30 days at the time the

pre-foreclosure sale is closed.


Agency pre-approval is required for non-occupant borrowers

when it is verified that the need to vacate is related to the cause

of the default (job loss, transfer, divorce, death).


PFS is not available to borrowers who have abandoned their

mortgage obligation despite their continued ability to pay.


****Properties that have sustained serious damage (from fire, flood,

earthquake, tornado, or other man made or natural disasters) should

not be considered for PFS if the cost of repair exceeds 10 percent of

the As Repaired appraised value.


The documentation requirements for a pre-foreclosure sale differ

depending on the type of borrower.


Employee in a private or public organization

  • Letter from borrower outlining failure to pay/hardship

  • Current pay-stub

  • BPO/appraisal

  • Sales contract/HUD-1 Settlement Statement, and

  • Credit report.


Self Employed

  • Year-to-date profit and loss statement

  • Previous year’s profit and loss statement, and

  • Previous year’s signed tax return.


USDA PFS Guidelines.pdf 

Here's a link if you need to locate a local office.

 USDA Value Dispute Form.pdf

USDA Loss Mit Guide.pdf


BofA USDA SS Packet.pdf

USDA Is a Tough Collector When Mortgages Go Bad

Discussion Forum

Need help with a USDA short sale serviced by Chase

Started by Melanie Yarberry. Last reply by Melanie Yarberry Mar 10. 2 Replies

We are working on a USDA short sale with Chase and the file has been declined & closed multiple times. It was closed for "voluntary hardship" because the seller moved out of state to find work…Continue

Help with USDA short sale - need contact

Started by Glenda Sher. Last reply by Carrie Fairman Feb 24, 2015. 5 Replies

Does anyone have any ideas on how to escalate a file that was denied by USDA?Serviced by Chase. Chase says investor denied due to borrower lack of hardship. Totally ridiculous.  They refused her many…Continue

USDA contact info to expedite

Started by Sara Senet Feb 19, 2014. 0 Replies

The servicer, M&T bank, submitted our full value offer to USDA on 12/16 for approval.  They are saying that USDA is behind and not yet responding and they don't have any direct contact…Continue


Started by Jon Batten. Last reply by Jon Batten Oct 21, 2013. 6 Replies

I just got a SS Listing. The load is USDA through B of A. They buyer has tried modification three times the first two were turned down. The third was taking so long that he gave up waiting and…Continue

Comment Wall


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Comment by Bill Garrett on June 22, 2016 at 10:59am

MINIMUM NET PERCENTAGE?...............Is there a standard percentage used by USDA is calculating an acceptable minimum net (similar to what is done with VA or FHA loans)?............Thanks.

Comment by Chad Gelsinger on November 2, 2015 at 8:59am

USDA Direct Loans (where there is NO SERVICER) follows different rules and regulations. With a direct loan, we have never seen a waiver of deficiency when the approval letter is issued. Typically, about 90 days after the sale, USDA issues a demand letter for payment... At this time, the borrower needs to send another workout package requesting a waiver of deficiency. All of our clients have received a waiver of deficiency at that time. We have not had any clients needing to repay the debt. Chad. 

Comment by Kevin - Greenville, SC on October 30, 2015 at 12:57am

from a 2013 Guide - 

  1. Pre-Foreclosure Sale (referred to as a “short sale”) - Allows borrowers in default to sell their home and use the proceeds to satisfy the mortgage debt, even if the proceeds are less than the amount owed. This option can only be extended to a borrower who is in default due to a verified involuntary inability to pay.20 Agency pre-approval is required for non- occupant borrowers when it is verified that the need to vacate is related to the cause of the default (job loss, transfer, divorce, or death) and the reason for default must be permanent. However, a short sale is not available to borrowers who have abandoned their mortgage obligation, despite their continued ability to pay. A borrower, who successfully sells the property, securing the loan using the short sale option, is relieved of the mortgage obligation. In addition, the borrower shall not be pursued for deficiency judgments by either the lender or the agency.

Comment by Kevin - Greenville, SC on October 30, 2015 at 12:52am

This is a new guide keep in mind (dated 9.15). I'm not sure if their guidelines were the same when they sent your client their demand letter.

Comment by Kevin - Greenville, SC on October 30, 2015 at 12:50am

A borrower who successfully sells the property securing the loan using the PFS option is relieved of the mortgage obligation. The borrower shall not be pursued for deficiency judgments by either the servicer or the Agency.

Comment by Kevin - Greenville, SC on October 30, 2015 at 12:46am

Geno, what did the short sale approval letter say about the deficiency?

Comment by Geno Carnera on October 28, 2015 at 1:28pm

I completed a direct USDA SS about a year ago.  

I submitted a pre-approval for waiver of obligation in a non-judicial state.  Waiver of obligation was denied by USDA.  I explained to the Home Owner and to the "USDA servicer" that they could remain in the house and get foreclosed on and be automatically released from the first lien obligation.  The Home Owner wanted to proceed with the SS.  

90 days after close of escrow, USDA sent demand for remainder of short fall. Client was forced into BK.

Comment by Bill Garrett on August 28, 2014 at 5:31pm


Is it necessary to have a buyer's offer to begin the USDA short sale process?  Or, is there a retention/waterfall review similar to an FHA mortgage?  Thanks

Comment by Jeff Struchen on August 7, 2014 at 1:08pm

I have seen any posts or responses on this group for quite some time. I have an issue with BofA on a USDA loan. Seller has been through BK and included note in BK. BK discharged over 1 yr ago. BofA insists that seller MUST provide full financial disclosure to qualify for SS. Anyone have contact for USDA to verify this? 

Comment by Karen Mordus on October 14, 2013 at 6:10pm

I need help with my WF USDA loan.  Yet another one of my WF loans is over appraised again!  I'm getting very tired of this over appraised game their playing, this is the second home I may lose to a DIL.  My poor clients!!

WF negotiator said I can appeal the comps, however I can only go 1 mile out and under 6 months of STL comps. ?  What ever happened to 12 months of settled comps? Has USDA changed their guidelines? If there are no other comps, what then? I need to go 2 miles out to get any reasonable close comps.  My negotiator said "no way"!  This property is only valued at $90k, I have a solid offer of $95k. WF has appraised it at $130k. I've spoken with each of the buyer's agent's on their appraisal and each property has been move in ready, with upgrades. My property has holes in walls, water damage, no appliances (zero!) and the a/c does not work.  Oh the kicker....the appraiser is the same guy WF used on my last client (DIL)

Anyone had this happen before? Any advice on how I can handle this? Right now I have no recourse but list the property at their $130k, let it sit for 60 days and then USDA will allow my seller to the option of a DIL.


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