+----------+-----------------------------------+----------------------+
| ![       | ***United States Florida/Virgin   | ***Rural Housing     |
| ](media/ | Islands***                        | Service***           |
| image1.p |                                   |                      |
| ng){widt | ***Department of 4440 Northwest   | *Telephone:          |
| h="0.982 | 25th Place***                     | 352-338-3435*        |
| 63888888 |                                   |                      |
| 88888in" | ***Agriculture Post Office Box    | *Fax: 352-338-3437*  |
| height   | 147010***                         |                      |
| ="0.6395 |                                   | *TDD: 352-338-3499*  |
| 83333333 | ***Rural Development Gainesville, |                      |
| 3333in"} | FL 32614-7010***                  |                      |
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|          |                                   |                      |
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TO: Approved SF-GRH Lenders

ATTENTION: Servicing and Loss Claim Managers

SUBJECT: Single Family - Guaranteed Rural Housing (SF-GRH)

Lender Real Estate Owned Property Disposition Plans

RHS and the lender have a common interest in efficiently disposing of
REO by minimizing costs and maximizing recovery. To achieve that end, it
is essential to establish consistent policies and coordinate relevant
aspects of REO disposition so there is no impediment to the expeditious
sale of the REO and the settlement of loss claims.

The purpose of a property disposition plan is to ensure that both RHS
and the lender have a mutual understanding of how a property will be
marketed and what factors might influence the net proceeds from the
sale. While RHS does not impose specific marketing requirements, 7 C.F.R
§1980.370, binds a lender to "...perform those services which a
reasonable and prudent lender would perform in servicing its own
portfolio of loans that are not guaranteed." This condition applies as
well to REO disposition practices. RHS expects a lender to list and sell
REO, given prevailing market conditions, in a manner that maximizes
recovery. If necessary to accomplish this, the lender may offer
concessions that are reasonable and customary for the area. Seller
concessions beyond what is reasonable and customary are allowed only if
the sales price is increased in a commensurable amount.

**Submitting a property disposition plan.**

Under 7 C.F.R. § 1980-376(a)(1)(ii), lenders must submit property
disposition plans for RHS concurrence if they take title to the property
at liquidation. A lender should submit a property disposition plan to
RHS for each REO within 30 days of liquidation. RD Instruction 1980-D,
§19803302(a) defines liquidation as follows: "Liquidation of the loan
occurs when the Lender acquires title to the security....In States
providing a \[post-sale\] redemption period, the Lender does not
typically acquire title until after expiration of the redemption
period". Thus, the 30-day time period for submitting a property
disposition plan would not begin until after expiration of any
applicable redemption period. Lenders that are unsure whether a
redemption period will affect the due date of the disposition plan
should contact the GRH State Office for the state in which the property
is located. If, before marketing and within 30 days of liquidation, a
lender chooses to file a loss claim based on a liquidation value and
estimated REO expenses, a disposition plan will not be required.

RHS and the lender have a common interest in effectively assessing an
accurate value of the REO property prior to the submission of a property
disposition plan and settlement of a loss claim. If the interior
condition of the property cannot be determined due to an
[]{.mark}incomplete eviction process or some other legitimate reason,
the circumstances should be documented and presented to the Agency with
the property disposition plan within 30 days of gaining access to the
property. Such circumstances do not extend the six-month marketing
period.

**Contents of a property disposition plan.**

Beyond a written plan as described below, RHS does not require
additional documentation to be submitted with the plan. Supporting
documentation should be held in the lender file to submit with the loss
claim or, if necessary, for subsequent RHS review. To assure a mutual
understanding of the proposed disposition, the plan should address the
following:

-   Date acquired and, in case of redemption and/or eviction, date of
    possession.

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-   Estimate of present market value based on an interior appraisal or
    Broker's Price Opinion (BPO). Include valuation type **and** date.

-   Itemization and cost of emergency maintenance to secure, and/or
    repairs necessary to market the property.

-   Itemization and cost of any other planned capital improvement
    repairs, including the expected amount of property value to be
    added.

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-   Proposed marketing methods. This should include techniques to be
    used, such as the type of listing - exclusive broker, open or
    multiple listing; whether the property will be sold as-is or
    as-improved; proposed advertising -- open house, broker tour, media
    frequency, signs; and whether financing or seller concessions will
    be offered.

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-   Anticipated marketing expenses, including advertising, commissions,
    and seller concessions, including any contributions to closing
    costs.

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-   Statement of listing price and expected marketing time, minimum
    acceptable price or other bid acceptance policy; for example, if a
    percentage of the listed price will be used, or if a lower
    acceptable bid is contingent on marketing time.

-   Any other information related to the sale that might impact the
    amount of loss.

-   Name, telephone and fax numbers, and email address of the lender's
    contact person.

-   Name, telephone and fax number, and email address of the real estate
    agent.

A property disposition worksheet is provided for use as Attachment #1.
The lender may use this form or any format which includes all required
data elements listed above.

**RHS concurrence with a property disposition plan.**

A lender should proceed expeditiously with REO disposition. When a
lender submits an acceptable property disposition plan, the Agency is
not required to provide written concurrence. If necessary, RHS will
contact the lender for clarifications, additional information, or to
provide recommendations within 5 business days after receipt of the
plan. The Agency reserves the right to reject a plan that indicates a
deficiency or departure from prudent disposition practices. After
implementation, a lender should review any significant departure from
the plan with RHS before disposition. RHS review and acceptance of a
property disposition plan does not necessarily mean that all expenses
associated with the plan will be accepted as reimbursable cost items for
the loss claim. Reimbursable expenses must be reasonable and customary.
At its discretion, the Agency reserves the right to request a copy of
the appraisal or BPO that was used to develop the disposition plan on a
case-by-case basis. Copies of the appraisal or BPO will typically be
required for Quality Control purposes or to help justify recommended
listing prices that are unusually low.

**Failure to submit a property disposition plan.**

If, after marketing the property for sale, a lender submits a loss claim
and a required property disposition plan has not been submitted, RHS
will notify the lender of plan requirements. If REO has been sold
without prior submission of a required plan, RHS, before a claim is
paid, will require the lender to submit a disposition summary to address
each of the items required for a property disposition plan, providing
actual marketing activities, prices and expenses. A lender may risk loss
claim reduction or denial for failure to act prudently on REO
disposition. RHS will monitor lenders for compliance with property
disposition plan requirements and provide training when necessary.

**For Further Information:**

Questions about this AN may be directed to Joyce Halasz or Jenise Hight
of the SFH, Guaranteed Loan Division, USDA, Rural Housing Service, 1400
Independence Ave., SW, Washington DC, 20250-0784. The telephone number
is 202-720-1452.

Attachment

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