18.104.22.168 USDA Post-Forbearance
For guaranteed loan borrowers facing COVID-19 hardships the USDA has made minor adjustments to its workout waterfall. For borrowers exiting forbearance with the ability to afford their pre-forbearance payments, “the lender shall offer the borrower a written re-payment plan to resolve any amount due or at the borrower’s request, extend the loan term for a period that is at least the length of the forbearance.”109 The USDA is silent on whether the term extension requires the submission of any financial information. Borrowers who cannot afford post-forbearance payments should be reviewed for standard USDA guaranteed loan loss mitigation options.110
For direct loan borrowers facing COVID-hardships the USDA has not provided any specific relief. This lack of post-forbearance pandemic relief is a problem for borrowers because the USDA’s standard post-forbearance options do not allow for an interest rate reduction or loan term extension.111 Forbearances may lead to large past-due amounts that the present direct loan options may not handle well. Finally, the USDA’s reference to “forbearance” as a special COVID-19 option when it means its long-standing moratorium program is likely to confuse borrowers. The USDA’s arcane moratorium program has little in common the COVID-19 forbearance options available for all other types of federally-backed loans, as discussed in this section.
110 See § 22.214.171.124, supra.
111 See National Consumer Law Center & National Housing Law Project, Issue Brief, USDA Should Modernize Mortgage Protections: Four Long-Overdue Policy Changes to Limit Rural Foreclosures (Apr. 2019), available at https://www.nclc.org. See generally § 126.96.36.199, supra.