RD Instruction 1904-D

PART 1904 - BORROWER CASE CLASSIFICATION

Subpart D - Classification of Multi-Housing Projects

## Table of Contents

[Sec]{.underline}. [Page]{.underline}

1904.151 General. 1

1904.152 - 1904.154 \[Reserved\] 1

1904.155 Overview. 1

\(a\) Introduction. 1

\(b\) Project classification report. 1

\(c\) District office review. 2

\(d\) Summary. 2

1904.156 - 1904.159 \[Reserved\] 2

1904.160 - Definitions. 2

\(a\) Active project. 2

\(b\) Classifications. 2

\(c\) Project security value. 4

\(d\) Project status code. 4

1904.161 - 1904.169 \[Reserved\] 4

1904.170 District Office staff processing. 4

\(a\) Review RC 836-C. 4

\(b\) Update AMAS Loan Classification Data

Input Screen. 6

1904.171 - 1904.179 \[Reserved\] 6

1904.180 Project classification inquires. 6

1904.181 - 1904.189 \[Reserved\] 6

1904.190 Multi-housing project classification reports. 6

\(a\) District office classification reports. 6

\(b\) State office classification reports. 7

\(c\) National office classification reports. 7

1904.191 - 1904.200 \[Reserved\] 7

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RD Instruction 1904-D

PART 1904 - BORROWER CASE CLASSIFICATION

Subpart D - Classification of Multi-Housing Projects

§1904.151 [General]{.underline}.

Office of Management and Budget Circular A-129 requires at least an
annual assessment of agency loan portfolio loss risks. Multi-Housing
project loss risks will be estimated based on automated software using
project classification codes and project security values established in
accordance with this Instruction. The primary purpose of the data
derived is for use in reporting the \"Allowance for Uncollectible
Accounts.\" This allowance figure is a required entry in the Agency\'s
accounting information which is forwarded for use by central management
agencies such as the Office of Management and Budget (OMB) and the
Department of Treasury (DOT).

§§1904.152 - 1904.154 \[Reserved\]

§1904.155 [Overview]{.underline}.

\(a\) [Introduction]{.underline}. Multi-housing project classifications
will be done on a project basis. Most multi-housing projects will NOT
require District Office staff evaluation of project classifications.
Active multi-housing projects whose accounts are 180 days or less past
due and whose recoverable cost charges outstanding do not exceed 10
percent of the outstanding project balance will NOT require District
Office staff to review project classification assessments. These
projects will automatically be classified in accordance with the
classification definitions set out in this Instruction. Loss risks for
these projects will be determined using historical loss data for the
multi-housing loan portfolio.

\(b\) [Project classification report]{.underline}. The Finance Office
will issue Report Code (RC) 836-C, \"Classifications of Multiple Family
Housing Projects,\" on June 30 of each year for use by District Office
staff in reviewing and/or establishing a project classification on those
active projects listed in the report. The projects listed on this report
will include those that are identified as being 181 days or more past
due, or those projects whose recoverable cost charges outstanding exceed
10 percent of the outstanding project balance. The report will also
include projects with court action pending (CAP), foreclosure action
pending (FAP), and subject to approved adjustment (SAA) project status
codes.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

DISTRIBUTION: WSDC General

Borrower Case Classification

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RD Instruction 1904-D

§1904.155 (Con.)

\(c\) [District Office review]{.underline}. District Office staff will
review those project names listed on RC 836-C and use the Automated
Multi-Housing Accounting System (AMAS) screens to record loan
classification data and inquire on loan classification data when
reviewing/establishing/updating any needed loan classification or
project security value for the project (Note: The loan classification
input screen is accessed through use of AMAS Loan Servicing Subsystem
Menu selection 25 \"Record Loan Classification Data - M5D,\" and the
inquiry screen for loan classification is accessed through use of AMAS
Inquiries Subsystem Menu selection 19 \"M5DI-Loan Classification
Data.\") The District Office staff will review/establish/update any
needed loan classification or project security value for the project
within 30 days after receipt of RC 836-C or by August 30 of each year,
whichever is earlier (i.e., assuming receipt of the report by July 15,
District Office staff will generally need to evaluate and complete entry
of any needed changes by August 15th of each year.)

\(d\) [Summary]{.underline}. In general, the software is designed to
compare the estimated project security value for those projects
requiring such entries on AMAS screens (this value is evaluated
annually) against the outstanding loan balance owed as of any particular
date. Potential losses on active multi-housing projects will be
reflected whenever the project security value is calculated to be less
than the amount outstanding.

§§1904.156 - 1904.159 \[Reserved\]

§1904.160 [Definitions]{.underline}.

\(a\) [Active project]{.underline}. All projects excepting those having
a paid code (See AMAS Screen MIFI \"Inquire on Loan.\")

\(b\) [Classifications]{.underline}. All multi-housing classifications
will be done on a project basis. Whenever the term \"loan
classification\" is used in this Instruction, it has the same meaning as
the term \"project classification.\" The following classification
definitions are used for active multi-housing projects (note the
commercial classification code 1 used in some other Rural Development
loan programs, is not used for multi-housing projects):

\(1\) [Standard (code 2)]{.underline}. Projects are coded standard if
all the following conditions are met:

\(i\) The project payment status is ahead of schedule or 0 to 90 days
past due.

## 2

§1940.160 (b) (1) (Con.) RD Instruction 1904-D

\(ii\) Recoverable cost charges outstanding are less than or equal to 10
percent of the outstanding project balance.

\(iii\) The project does not have a project status code for CAP, FAP, or
SAA.

\(2\) [Substandard (code 3)]{.underline}. Projects are coded substandard
if any of the following conditions are met:

\(i\) The project account status is 91 to 180 days past due and
recoverable cost charges outstanding do not exceed 10 percent of the
outstanding project balance.

\(ii\) The project payment status is 181 or more days past due or
recoverable cost charges outstanding exceed 10 percent of the
outstanding project balance PROVIDED the project security value is equal
to or greater than the outstanding project balance.

\(iii\) The project has an AMAS project status code for CAP, FAP, or SAA
and the project security value is equal to or greater than the
outstanding project balance. (See AMAS Screen M4YI \"Inquire on Project
Miscellaneous Data,\" to check the project status code and the status
code date. If a status code needs updating, use the AMAS \"Record
Borrower/Project Data Screen.\")

\(3\) [Doubtful (code 4)]{.underline}. Projects are coded doubtful if
all the following conditions exist:

\(i\) The project payment status is 181 or more days past due or
recoverable cost charges outstanding exceed 10 percent of the
outstanding project balance.

\(ii\) The project is not in the loss classification category.

\(iii\) The project security value is less than the outstanding project
balance.

\(4\) [Loss (code 5)]{.underline}. Projects are coded loss if all the
following conditions exist:

\(i\) The project has a project status code for CAP, FAP, SAA, or a
project status code for a transfer pending when the project payment
status for the pending transfer is 181 or more days past due.

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RD Instruction 1904-D

§1904.160 (Con.)

\(ii\) The project security value is less than the outstanding project
balance.

\(c\) [Project security value]{.underline}. The project security value
is the estimated dollar value that the project would be appraised for
minus the dollar value of any outstanding prior liens. A current
appraisal may be used or an estimated appraised value may be used in
processing project classifications.

\(d\) [Project status code]{.underline}. The project status code can be
established and/or updated by entering the appropriate code on the AMAS
\"Record Borrower/Project Data\" screen. The project status code and
project status code date are displayed on AMAS Screen M4YI \"Inquire on
Project Miscellaneous Data.\" The project status codes are as follows:

[Code]{.underline} [Description]{.underline}

0 No Descriptive Code

1 Court Action Pending (CAP)

2 Foreclosure Action Pending (FAP)

3 Project Paid in Full by Cash (System

Generated)

4 Subject to Approved Adjustment (SAA)

5 Investigation

6 Transfer Pending

7 Rental Assistance (RA) Payments Not Allowed

8 Project Closed (System Generated)

9 Project Converting to Predetermined

Amortization Schedule System (PASS) (System

Generated)

§§1904.161 - 1904.169 \[Reserved\]

§1904.170 [District Office staff processing]{.underline}.

The District Office staff will receive RC 836-C on an annual basis. (The
Finance Office will prepare and distribute RC 836-C to each District
Office on June 30 of each year.) Upon receipt of the RC 836-C, the
District Office staff must review and take appropriate classification
action on each project listed on the report within 30 days of receipt or
by August 30 of each year, whichever is earlier. For each project listed
on the RC 836-C the staff must:

\(a\) [Review RC 836-C]{.underline}. Review the information printed on
RC 836-C to determine if any information needs updating or further
review. The \"DATE LAST CLASSIFIED\" data appearing on the report need
NOT be changed on the AMAS \"Record Loan Classification Data Input\"
screen after each annual review if the information on the report is
accurate and needs no change. The \"Date Last Classified\" will reflect
the date the last classification

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§1904.170 (a) (Con.) RD Instruction 1904-D

change took place. The project security value must be entered for
projects listed on RC 836-C which do not show data in this field on RC
836-C. The project security value figure appearing for projects listed
on RC 836-C must be reviewed and updated when needed. The project
security value may be estimated, as appraisals are not expected to be
completed or updated solely for the purposes of completing project
classifications under this Instruction.

\(1\) [Effects of software updating on RC 836-C]{.underline}. RC 836-C
is updated each year just prior to issuing the report. As a result of
this update, information entered on the AMAS \"Record Loan
Classification Data Input\" screen by District Office staff when
classifying last year\'s activity may change. Such changes may occur for
reasons such as the project:

\(i\) Outstanding balance being different than it was at the time the
last update was performed.

\(ii\) Payment status being different than it was at the time the last
update was performed.

\(iii\) Project status code being different than it was at the time the
last update was performed.

\(2\) [Loan classification code changes since last update]{.underline}.
This year\'s RC 836-C may reflect different classification code changes
than those printed on last year\'s report or entered by the District
Office on the AMAS \"Record Loan Classification Data Input\" screen at
the time any previous year\'s review was conducted. This should be
expected and is the result of the routine updates (see overview at
§1904.155 of this Instruction). Thus, an account which was 181 days or
more delinquent with a project status code last year, but has no project
status code this year, or is less than 181 days delinquent this year,
may now have a different classification code. Depending on this year\'s
status code, the account may not appear on this year\'s RC 836-C report,
or could appear on the report but have a different status code.

\(3\) [Estimated loss amount changes since last update]{.underline}. The
latest issued RC 836-C may reflect an estimated loss amount which
differs from that printed on the previous year\'s report or differs from
that expected when the District Office staff entered information on the
AMAS \"Record Loan Classification Data Input\" screen. This should be
expected, and is the result of the routine updates (see overview at
§1904.155 of this Instruction). The District Office staff should seldom
be concerned that the estimated loss amount changes. This data item will
nearly always change since it is determined from the

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RD Instruction 1904-D

§1904.170 (a) (Con.)

difference between the project outstanding balance and the project
security value. Assuming the account has been matured since last year\'s
report, this data item can be expected to change. The District Office
staff is not expected to verify that the automated software calculated
the estimated loss amount accurately as of a particular date. It is
normally sufficient to determine the apparent reasonableness of the data
without verification, based on a cursory review.

\(4\) [Project security value changes since last update]{.underline}.
This data item should not change unless the field office entered a new
figure for this data item on the AMAS \"Record Loan Classification Data
Input\" screen. The automated software is designed to accept field
office entries for this data item. Annual automated updates should
therefore have no effect on past field office entries on this data item.

\(b\) [Update AMAS Record Loan Classification Data Input
Screen]{.underline}. Record appropriate data on the AMAS \"Record Loan
Classification Data Input\" screen when information shown on RC 836-C
needs updating or when no information is shown in one or more data
fields on RC 836-C. The \"DATE LAST CLASSIFIED\" data appearing on RC
836-C cannot be updated by field offices after each annual review (i.e.,
DO NOT attempt to enter a new date in item 5 \"EFF DTE\" on the \"Record
Loan Classification Data Input\" screen. This date will change only if
the automated system determines a loan classification change took
place.)

§§1904.171 - 1904.179 \[Reserved\]

§1904.180 [Project classification inquiries]{.underline}.

Agency employees may access AMAS screen M5DI if needed. The M5DI screen
may be used for general inquiry or to review information for accuracy.

§§1904.181 - 1904.189 \[Reserved\]

§1904.190 [Multi-housing project classification reports]{.underline}.

\(a\) [District Office classification reports]{.underline}. District
Office staffs will primarily use RC 836-C, \"Classifications of Multiple
Family Housing Borrower Accounts,\" in conjunction with multi-housing
classification reviews and updates.

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##  

§1940.190 (Con.) RD Instruction 1940-D

\(b\) [State Office classification reports]{.underline}. State Office
staff will primarily use the RC 636-L, \"Quarterly Summary Report of
Classifications for Multiple Family Housing Projects\--STATE,\" to
evaluate District and State Office summary data in conjunction with
multi-housing project classifications.

\(c\) [National Office classification reports]{.underline}. National
Office program staff will primarily use RC 636-L, \"Quarterly Summary
Report of Classifications for Multiple Family Housing
Projects\--NATION,\" to evaluate State and Nationwide summary data in
conjunction with multihousing project classifications.

§§1904.191 - 1904.200 \[Reserved\]

## oOo

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