After drawing media scrutiny last year over its debt collection practices, the U.S. Department of Agriculture -- which issues and insures mortgages to low- and moderate-income home buyers in rural areas -- is softening its approach. Unlike private lenders, the agency does not need court approval to initiate collection of unpaid debts; and in some situations, it is able to seize government benefits and tax returns from defaulted borrowers before their foreclosures are completed. Under a new policy, however, USDA will scale back one controversial tactic: pursuing foreclosed homeowners for unpaid balances, even in states where the practice is restricted among private lenders. USDA says it will not go after borrowers if they can prove that they are unable to pay the debt; and it is applying the new rule to mortgages issued or backed by it after Oct. 22, 2012.
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