### *Title I and Other Debt Collection Guidance* 

*Directive Number:* **4740.2**

**U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT**

WASHINGTON, D.C. 20410-8000

OFFICE OF THE ASSISTANT SECRETARY

FOR HOUSING-FEDERAL HOUSING COMMISSIONER

Special Attention of: Transmittal: Handbook 4740.2 REV-3

Director of Office of Financial Services Issued: February 13, 2008

Financial Operations Center (FOC) Director

FOC Asset Recovery Division Director

FOC Insurance Operations Division Director

FOC staff.

1.  **This Transmits:**

> Revision 3 of Handbook 4740.2 , Title I and other Debt Collection
> Guidance

2.  **Explanation of Changes:**

> This revision reflects changes in the general policies and procedures
> for servicing Title I defaulted notes and other debts.

a.  General Revisions.

> This handbook has been updated as warranted to reflect the collection
> tools authorized by the Debt Collection Improvement Act of 1996 and
> subsequent implementing regulations and instructions issued by the
> Department of the Treasury, the revised Federal Claim Collection
> Standards issued jointly by the Department of the Treasury and the
> Department of Justice (effective December 22, 2000), amended OMB
> Circular No. A-129 "Policies for Federal Credit Programs and Non-Tax
> Receivables" issued November 29, 2000, organizational changes within
> HUD since this handbook was last revised in 1992, and the assignment
> of more types of generic debts to the Financial Operations Center.
>
> This handbook has also been modified to accommodate comments and
> suggestions provided by the Office of General Counsel, Housing's
> Organizational Policy Planning and Analysis Division (regarding
> Paperwork reduction Act issues), Housing's Office of Lender Activities
> and Program Compliance, and the Office of the Chief Information
> Officer's Risk Management and Financial Policies and Procedures
> Divisions.
>
> Some paragraphs within the handbook have been moved to different
> chapters to better organize the material within the handbook.
>
> Paragraphs within the previous revision of the handbook referring to
> procedures that are no longer applicable have been removed.

b.  Chapter 1.

> **Paragraph 1-1, B** has been added to reference the Debt Collection
> Improvement Act of 1996.
>
> **Paragraph 1-1, C** has been revised to reflect the current HUD
> organizational structure.
>
> **Paragraph 1-2, B** now includes a list of Acronyms.
>
> **Paragraph 1-3** (Minimum Requirements) and **Paragraph 1-4**
> (Deviations from Policies and Procedures) have been moved and
> renumbered.
>
> **Paragraph 1-5** (Privacy) has been revised to cross-reference HUD's
> Privacy Act Handbook (HUD 1325.1 REV-1) and HUD's published Privacy
> Principles in lieu of the "fair information practices" presented in
> **Paragraph 1-3 of REV-2**.
>
> **Paragraph 1-7** (Authority to Compromise, Suspend, or Terminate
> Debt) has been revised to reflect that HUD's authority to collect
> Housing-FHA Title I and Title II debts is based on the National
> Housing Act.
>
> **Paragraph 1-9** (CAIVRS Reporting) has been added to describe the
> policy and process for reporting delinquent debts to HUD's Credit
> Alert Interactive Voice Response System (CAIVRS).
>
> **Paragraph 1-2** **from REV-2** (Jurisdictions) and **Paragraph 1-9
> from REV-2** (Debt Management Center Office Policy -- Duty Hours) were
> deleted as the three Debt Management Centers have been consolidated
> within the Financial Operations Center.
>
> **Paragraph 1-11 from REV-2** (Collections Credited to a DSR) was
> deleted because mandatory referral of delinquent debts to Treasury
> made this concept obsolete.

c.  Chapter 2.

> **Paragraph 2-3** has been relabeled as Routine Case **Information**
> Maintenance.
>
> **Paragraph 2-3, C from REV-2 (**Joint and Several Liability) has been
> deleted as the same material is covered in Chapter 1 (**Paragraph
> 1-11**).
>
> **Paragraph 2-5 from REV-2** (Debtor Characteristics) has been revised
> and replaced by new **Paragraph 2-5** (Responsive Debtor) and
> **Paragraph 2-12** (Unresponsive Debtor).
>
> **Paragraph 2-8 (**Settlement by Compromise), **Paragraph 2-9**
> (Partial Settlement Offer), **Paragraph 2-10** (Release of Lien
> Request -- Non-Federal (formerly Releasing Liens of Value)), and
> **Paragraph 2-11** (Release of Lien Request from Federal Agency
> (formerly (Releasing Valueless Liens)) have been moved from Chapter 5
> in REV-2 because these are routine debt collection matters.
>
> **Paragraph 2-10, B** from REV-2 was deleted as HUD now longer uses
> "Auto Call."

d.  Chapter 3.

> **Paragraph 3-6** (Bankrupt Debtors) has been expanded to include
> information about the Bankruptcy Abuse Prevention and Consumer
> Protection Act (2005).
>
> **Paragraph 3-7** has been added to describe the process for Treasury
> Offset Appeals.
>
> **Paragraph 3-8** has been added to describe the process for AWG
> Appeals.
>
> **Paragraph 3-15** has been added to include information about
> disaster relief activities.

e.  Chapter 4.

> A new **Paragraph 4-1** (Penalties and Administrative Costs) has been
> added.
>
> **Paragraph 4-1 from Rev-2** (IRS Income Tax Refund Offset) has been
> replaced by new **Paragraph 4-2** (Treasury Offset Program) because
> Tax Refund Offsets are now processed via TOP.
>
> A new **Paragraph 4-3** was added to provide policy and procedures
> regarding the Treasury Cross-Servicing Program.
>
> A new **Paragraph 4-4** was added to provide policy and procedures
> regarding the Administrative Wage Garnishment.
>
> **Paragraph 4-5** (Federal Salary Offset) is an abbreviated version of
> **Paragraph 4-2 from REV-2** (Salary Offset) because salary offset is
> now accomplished via the Treasury Offset Program.
>
> **Paragraph 4-4 from REV-2** (Private Collection Agencies) has been
> replaced by a cross reference to Cross-Servicing because HUD no longer
> refers debts directly to private collection agencies.

f.  Chapter 5.

> This chapter has been revised and restructured, and follows a new
> introductory paragraph. Information on terminating collection action
> and closing out accounts remains, but information from REV-2
> concerning collection activity has been relocated to Chapter 2.
>
> The material in **Paragraph 5-1 from REV-2** (Payment in Full) has
> been reorganized into **Paragraph 5-1** (Payment in Full), **Paragraph
> 5-3** ("90-Day Rule" for Payment Confirmation), and **Paragraph 5-4**
> (Surrender of Cancelled Documents).
>
> **Paragraph 5-1 from REV-2** (Settlement by Compromise Offer) has been
> condensed to **Paragraph 5-2** (Paid Compromise) with information on
> processing compromise offers moved to Chapter 2 (**Paragraph 2-8**).
>
> **Paragraph 5-3 from REV-2** (Partial Settlement Offer), **Paragraph
> 5-10 from REV-2** (Releasing Liens of Value), and **Paragraph 5-11
> from REV-2** (Releasing Valueless Liens) have been moved to Chapter 2.
>
> **Paragraph 5-7 from REV-2** (Collection Agency) has been replaced by
> new **Paragraph 5-7** (Returned from Cross-Servicing) because HUD no
> longer refers debts directly to private collection agencies.
>
> **Paragraph 5-8 from REV-2** (U.S. Attorneys) has been replaced by
> **Paragraph 5-8** (Department of Justice Cases).
>
> **Paragraph 5-9 from REV-2** (Write-Off) has been replaced by new
> **Paragraphs 5-9** (Write Off), **5-10** (Currently Not Collectible
> (CNC)), **5-11** (Uncollectible), and **5-12** (Other Closing Types)
> to better distinguish the accounting transactions (Write Off and CNC)
> from the termination transaction (close-out).
>
> **Paragraph 5-12 from REV-2** (Surrender of Cancelled Documents) has
> been moved and renumbered to **Paragraph 5-4**.
>
> **Paragraph 5-13 from REV-2** (Documentation for Closing Accounts) has
> been expanded and replaced by new **Paragraph 5-13** (Closeout
> Process).

g.  Chapter 6

> Chapter 6 has been updated to reflect current procedures.
>
> **Paragraph 6-5 from REV-2** (Automated Reports) has been deleted
> because a current listing of available reports may be obtained from
> the DCAMS User Manual.

h.  Chapter 7.

> **Paragraph 7-1 from REV-2** (Processing Payments), **Paragraph 7-2
> from REV-2** (Lockbox Depositing), **Paragraph 7-3 from REV-2**
> (Electronic Deposits), and **Paragraph 7-7 from REV-2** (Single Family
> Deficiency Judgment Collections) have been consolidated into new
> **Paragraph 7-1** (Processing Payments.)
>
> New **Paragraphs 7-4** (Interest) and **7-6** (Penalties and
> Administrative Costs -- Fiscal Processing) have been added.
>
> The detailed processing information in **Paragraph 7-8 from REV-2**
> (Protective Bids) has been deleted because this process is obsolete
> and because protective bid transactions have been very rare.

i.  Chapter 8. This chapter has been revised to include information on
    collection of all types of generic debts rather than just Single
    Family Deficiency Judgments. In addition, the chapter has been
    revised to contain only those processes that differ from the normal
    collection guidance listed elsewhere in this handbook.

j.  Appendices. The appendices have been revised to contain the most
    current version of forms and sample documents that are referenced in
    this revision to the handbook.

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3.  Filing Instructions

> Replace all copies of Handbook 4740.2 REV-2, dated 8/92.
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> Assistant Secretary for Housing
>
> Federal Housing Commissioner