I'm currently assisting some homeowners with a short sale on a property on which they have a USDA mortgage. They haven't made a mortgage payment since July of last year, and yesterday they called me to inform me that instead of receiving their income tax refund they received a letter. The letter stated that because they were behind on a government loan, their tax refund had gone towards that debt...ouch! Needless to say they were disappointed, and not too happy.
Not sure if this has happened to anyone else, but this was the first time I saw this happen on a short sale. If you didn't know this could happen, now you do! This was a learning lesson for me as well....
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