The USDA offers the Housing and Community Facilities Programs (HCFP) which helps rural communities and individuals by providing loans and grants for housing and community facilities.
Sometime lenders make loans an they are guaranteed by the USDA, and sometimes the USDA makes direct loans to individuals (called Section 502 loans that are primarily used to help low-income individuals or households purchase homes in rural areas).
Like any other mortgage, if homeowners under the USDA loans fall behind and foreclosure is necessary, the USA will proceed with foreclosure.
However, a recent WSJ article (4-2-13, C2) mentioned that the USDA is backing off foreclosing on properties for those homeowners they determine can’t afford to pay off the loan (however that’s determined – no gold teeth???). Apparently, the USDA doesn’t need permission by a court to collect on a debt and can seize government benefits or tax refunds to cover back payments even prior to foreclosure. Most recent numbers indicate as of 2011, almost $800 million delinquent USA mortgages exist and only $45 million (about 6%) were collected.
Also, in fiscal 2011 alone the USDA guaranteed about $17 billion in mortgage and issued over $1 billion of direct loans. The latest data I could find on the USDA website = USDA Rural Development has a $181.1 billion portfolio of loans and will administer $38 billion in loans, loan guarantees and grants through our programs in the current fiscal year.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.