Which kind do you have?
If you send your payment to a bank or mortgage company, you have a guaranteed loan. If you pay USDA, you have a direct loan, and your contact is the USDA Rural Development Servicing Center at 1-800-414-1226.
Guaranteed loans: what the lender must do
The lender has to evaluate you and act to avoid a foreclosure. Before the loan is 60 days past due with no arrangement in place, it must send you a certified letter asking for an interview. To qualify for the standard options you must live in the home, be in default or about to be for a reason outside your control, and show a reasonable ability to repay.
Guaranteed loans: the options, in order
- 1. Repayment agreement: an informal plan of three months or less.
- 2. Special forbearance agreement: a plan to cure up to 12 months of missed payments.
- 3. Loan modification: a fixed rate no higher than the market rate, missed payments added to the balance, and a term that can run up to 40 years from the modification date. The target is a payment near 31 percent of your gross income.
- 4. Mortgage recovery advance: the lender advances money to cure what you are behind and lower the principal. It charges no interest and has no monthly payment. It is due when the first mortgage is paid off or the home changes hands. Advances together cannot pass 30 percent of the unpaid balance at your first default.
Guaranteed loans: the streamline modification
If you are at least 90 days past due and the loan has not been accelerated or sent to foreclosure, the lender can offer a 40-year fixed-rate streamline modification that cuts the principal and interest payment by at least 10 percent. It does not require a review of your finances. You make trial payments first, and the lender may not charge you a fee for it.
Direct loans: what USDA can do
- Payment moratorium: USDA can defer your payments for up to two years. You must live in the home, the loan must not have been accelerated, and you must be temporarily unable to pay because your income fell at least 20 percent in the past 12 months, because of unreimbursed costs from illness, injury or death, or because of uninsured damage to the home.
- After a moratorium the loan is re-amortized to include what was deferred. USDA can forgive some or all of the interest that built up if the new payment would be unaffordable.
- Delinquency workout agreement: your regular payment plus an extra amount that catches you up within two years or the time left on the loan, whichever is shorter. USDA can cancel it if you fall more than 30 days behind on it.
- Payment assistance: a subsidy that lowers the payment for borrowers who qualify.
Direct loans: act before acceleration
Once USDA accelerates a direct loan (demands the full balance), you are no longer eligible for these options. If USDA forecloses and the sale does not cover the debt, it can pursue you for the rest, unless you received a moratorium at some point and made a faithful effort to repay.
If you cannot keep the home
On a guaranteed loan, after the options to stay are used up, the lender can approve a short sale or a deed in lieu.
How much time do you have? It depends on your state.
See the foreclosure timeline, deadlines and free local help for the state where the home is.
Common questions
Can I ask for the moratorium on a guaranteed loan?
No. The two-year payment moratorium is for direct loans that USDA services itself. On a guaranteed loan, ask the lender for special forbearance, a modification or a mortgage recovery advance.
Do the federal application rules apply to USDA loans?
A guaranteed loan is serviced by a private lender, so the federal rules on timing apply as they do to other mortgages on your main home. See your federal rights. Whatever kind of loan you have, a free HUD-approved counselor at (800) 569-4287 can help you apply.
Keep reading
- What to do firstThe earlier you act, the more options you have. These are the first six things to do, in order, whether you are about to miss a payment or are already a few months behind.
- A sale date is setA sale date means time is short, not that it has run out. Each option below has its own cutoff, so the order you act in matters. Start today.
- Avoid foreclosure rescue scamsPeople facing foreclosure are a target. Federal law bans most upfront fees for mortgage relief, so any company that asks to be paid before you have an offer from your servicer is breaking the rules.
- Your federal rightsFederal rules (Regulation X) set the floor in every state. They do not force your servicer to approve any option, but they control when it can start a foreclosure and how it must handle your application.
- Help by loan typeYour servicer collects the payments, but the rules for what it can offer you come from whoever owns or insures the loan. Find that out first.
- Taxes after foreclosureThe IRS treats a foreclosure as a sale, and forgiven debt is usually income. The main home exclusion many people relied on has expired for most 2026 cases, but insolvency and bankruptcy exclusions still apply.
Sources
- 7 C.F.R. § 3555.301, USDA guaranteed loan servicing duties (eCFR)
- 7 C.F.R. § 3555.303, USDA guaranteed loan servicing options (eCFR)
- 7 C.F.R. § 3555.304, USDA streamline modification (eCFR)
- 7 C.F.R. § 3555.305, USDA voluntary liquidation (eCFR)
- 7 C.F.R. § 3550.207, USDA direct loan payment moratorium (eCFR)
- 7 C.F.R. § 3550.205, USDA direct loan delinquency workout agreements (eCFR)
- 7 C.F.R. § 3550.211, USDA direct loan liquidation (eCFR)
- USDA Rural Development: Single Family Housing Direct Home Loans