U. S. Department of Agriculture RD Instruction 426.1

Rural Development

Farm Service Agency

## TABLE OF CONTENTS

## REAL PROPERTY INSURANCE

[Paragraph]{.underline} [See Sheet]{.underline}

I General\...\...\...\...\...\...\...\...\...\...\...\...\.....1

A Authority\...\...\...\...\...\...\...\...\...\...\...\...1

B Borrower to Furnish Insurance\...\...\...\...\....1

C Borrower\'s Selection of Company\...\...\...\.....1

D Responsibility\...\...\...\...\...\...\...\...\...\....1

E Use of Form RD 426-1, \"Valuation of

Buildings\"\...\...\...\...\...\...\...\...\...\...\...\.....1

II COMPANIES AND POLICIES\...\...\...\...\...\...\...\.....1 Reverse

A Companies\...\...\...\...\...\...\...\...\...\...\...\...1 Reverse

B Insurance Policies\...\...\...\...\...\...\...\...\...1 Reverse

C Name and Location\...\...\...\...\...\...\...\...\....2 Reverse

D Loss or Damage Covered\...\...\...\...\...\...\.....2 Reverse

E Effective Date Insurance\...\...\...\...\...\...\...2 Reverse

F Term\...\...\...\...\...\...\...\...\...\...\...\...\.....3

G Mortgage Clause\...\...\...\...\...\...\...\...\...\...3

H Evidence of Premium Payment\...\...\...\...\...\...3 Reverse

I Policy Restrictions\...\...\...\...\...\...\...\.....4

J Buildings on Leaseholds\...\...\...\...\...\...\....5

III COVERAGE REQUIREMENTS\...\...\...\...\...\...\...\...\...5

A Loans Secured by a First Lien\...\...\...\...\....5

B Loans Secured by Other Than First Lien\...\....5 Reverse

C Exception of Buildings from Insurance\...\.....5 Reverse

IV EXAMINING AND GENERAL SERVICING OF INSURANCE\....6

A Examination by County Office of Policies,

Endorsements, Binders, and Other

Evidence of Insurance\...\...\...\...\...\...\....6

B Special Servicing of Insurance\...\...\...\...\...6 Reverse

V LOSSES\...\...\...\...\...\...\...\...\...\...\...\...\...\...7

A Protecting Property \...\...\...\...\...\...\...\....7

B Loss Covered by Insurance\...\...\...\...\...\.....7 Reverse

C Losses not Covered by Insurance\...\...\...\.....9

VI FAILURE OF BORROWER TO PROVIDE INSURANCE\...\.....9 Reverse

A Expired Policies\...\...\...\...\...\...\...\...\.....9 Reverse

B Insurance Canceled for Reasons Other than

Nonpayment of Insurance Premium\...\...\...\...10 Reverse

C Insurance Canceled for Nonpayment

of Premium\...\...\...\...\...\...\...\...\...\...\...10 Reverse

Attachment: Exhibit A

(03-25-91) SPECIAL PN

RD Instruction 426.1

## REAL PROPERTY INSURANCE

I [General]{.underline}.

A [Authority]{.underline}. This subpart sets forth the policies and
procedures regarding insurance requirements on real property which
serves as security for a debt under the Multi-Family Housing Programs of
the Rural Housing Service (RHS), herein referred to as the "Agency".
This subpart is inapplicable to Farm Service Agency, Farm Loan Programs.
(Revised 01-09-08, PN 417.)

B [Borrower to furnish insurance]{.underline}. The real estate mortgage
executed by the borrower provides that he will furnish and continually
maintain and pay for insurance on buildings situated or constructed on
the property with companies, in amounts, and on terms and conditions
satisfactory to the Agency until the loan is repaid.

C [Borrower\'s selection of company]{.underline}. The borrower may
select the insurance company provided that the company and insurance
policy comply with all the requirements set forth in this Instruction.

D [Responsibility]{.underline}. The field staff is responsible for
taking all actions in connection with insurance as may be necessary to
protect the security interest of the Agency. Any unusual situation that
may arise with respect to obtaining or servicing insurance should be
referred to the State Director or State Executive Director, as
appropriate. The Director will refer any questions of a legal nature to
the Office of the General Counsel (OGC). (Revised 12-23-96, SPECIAL PN.)

E [Use of Form RD 426-1, \"Valuation of Buildings.\"]{.underline} The
minimum insurance required will be indicated in the appraisal report by
the employee who makes the appraisal of property that includes insurable
buildings. In the case where no real estate appraisal is required or the
appraisal report does not indicate the minimum insurance coverage, Form
RD 426-1 will be prepared by the Agency employee. Reevaluation of the
buildings will not be done on appraisal reports; however, when new
buildings are constructed or values increase or decrease materially and
reevaluation is necessary to properly reflect the buildings\' security
interest of the Agency, the Agency employee will prepare or revise Form
RD 426-1 as appropriate. Changes made on an existing Form RD 426-1 will
be dated and initialed. The reason for any deletion will be noted on the
Form. (Revised 12-23-96, SPECIAL PN.)

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

DISTRIBUTION: WSAL Program Operations

Real Property

Property Insurance

## 

## Sheet 1

## (Revision 2)

(8-11-76) SPECIAL PN

RD Instruction 426.1

II [COMPANIES AND POLICIES]{.underline}: Property insurance policies or
other evidence of insurance will be accepted from borrowers when the
requirements outlined herein are complied with fully.

A [Companies]{.underline}. It is desirable that companies be licensed to
do business in the particular State or other jurisdiction where the
property is located, or that they be otherwise authorized by law to
transact business within such State or other jurisdiction (hereinafter
called \"State\"). If the required insurance is not available locally at
comparable rates from an insurance company licensed or otherwise
authorized to do business in the State, insurance may be accepted from
another company if (1) the OGC advises that policies issued by such
company will not be rendered unenforceable by virtue of the company\'s
failure to be licensed or otherwise authorized to transact business in
the State and that the company is a legal entity which may be sued in
the State where the insured property is located, and (2) the State
Director determines that the company is reputable and financially sound.
In making the above determinations, the State Director will consider all
relevant available information such as that which may be obtained from
financial statements, Best\'s Insurance Reports, State insurance
authorities, and other landing institutions.

B [Insurance Policies]{.underline}.

1 [STANDARD POLICIES]{.underline}. If a standard fire insurance policy
has been adopted for the State, it should be used unless State statutes
exempt the company from the regulations requiring its use. The standard
policy is one containing substantially the same standard provisions
adopted or recommended by legislative action or by order of the
supervisory insurance authorities of the State in which the security is
located.

2 [OTHER POLICIES]{.underline}. To be acceptable, any other insurance
policies, must conform to the requirements of this Instruction.

a \"Homeowner\'s\" policies, \"All Physical Loss\" policies, \"Broad
Form\" policies, and other such all-inclusive policies are acceptable if
they otherwise meet the requirements of this Instruction.

b A builder\'s risk policy naming the borrower as the insured or a
builder\'s risk endorsement for a policy issued to the borrower may be
accepted during the period a building is under construction if the
policy otherwise meets the requirements of this Instruction. If such a
policy or endorsement does not automatically convert to full coverage
when the building is completed, acceptable

II B 2 b (Cont.) RD Instruction 426.1

insurance must be obtained simultaneously with the expiration of the
builder\'s risk provisions of the policy.

c A builder\'s risk insurance policy issued to a contractor only may not
be substituted for the property insurance the borrower is required to
provide.

d Borrowers eligible for insurance under the National Flood Insurance
Act of 1968, as amended by the Flood Disaster Act of 1973, will be
serviced in accordance with RD Instruction 426.2.

3 [STATE INSTRUCTIONS]{.underline}. If the State Director and the OGC
consider it advisable, a State Instruction may be issued to help County
Supervisors identify standard insurance policies adopted for the State.
The Instruction should also furnish a guide to assist in identifying
other acceptable insurance policy forms that are commonly used by
insurance companies in the State, recognizing that such information is
not all inclusive.

4 [BINDERS]{.underline}. Whenever there is a justifiable reason for not
issuing a policy or endorsement, as required, a written binder will be
acceptable for a period not to exceed 60 days from the effective date of
the insurance. The written binder must have attached thereto the
approved form of mortgage clause. Such a binder will be submitted to the
County Supervisor in lieu of an insurance policy or endorsement and the
insurance policy or endorsement will be submitted on or before the
expiration date of the binder. The State Director, with the advice of
the OGC and subject to prior approval of the National Office, may issue
a State Instruction authorizing such binders to be accepted for periods
longer than 60 days.\
(Revised 8-30-89, PN 116.)

5 [SUBMISSION OF POLICIES]{.underline}. (Revised 03-25-91, SPECIAL PN.)

a For Farmer Program (FP) loans secured by a first lien, the original
policy or declaration page must be delivered to the County Supervisor.
The original policy or declaration page will be returned to the borrower
after one year using Form RD\
426-4, \"Notice of Expiration of Insurance.\"

b For Single Family Housing (SFH) loans secured by a first lien, the
original policy or declaration page must be delivered to the closing
agent.

c In cases where an FP or SFH loan is secured by other than a first lien
and the mortgage clauses include the names of the prior mortgagees, a
certificate of insurance, copy of the policy, or other evidence of
insurance is acceptable.

d The County Supervisor will process an advance to pay for insurance
only in strict compliance with provisions of\
paragraph VI of this Instruction.

## Sheet 2

## (Revision 4)

(8-11-76) SPECIAL PN

RD Instruction 426.1

II B (Cont.)

6 [MASTER SETS]{.underline}. If the master sets meet all of the
requirements of this Instruction they may be accepted in lieu of an
original policy for each The Agency borrower.

a One complete master set of the different insurance fees for policies
issued by the insurance company must be on file in each County Office
where the company insures property of The Agency borrowers.

b The \"Declaration Page\" furnished by the insurance company for each
borrower insured, in lieu of a complete policy, will be filed in the
borrower\'s case folder. When a \"Declaration Page\" in the form of a
computer printout is used by an insurance company an endorsement on
every policy issued by that company or a letter from that company will
be obtained and attached to the printout. However, a letter signed by an
authorized official of the company and addressed to the State Director
may cover all policies issued by that company in the State. Any such
endorsements or letters should clearly state that the company considers
the printout to be an original \"Declaration Page.\" Such endorsements
or letters are not necessary if the printout itself clearly states that
it is an original \"Declaration Page.\"

C [Name and Location]{.underline}. The policy should contain the names
of all of the borrowers who are owners of the property being insured,
and it will be returned for correction if it does not do so. The
location of the property should be so described in the policy that the
property can easily be identified. The complete legal description of the
property by metes and bounds is not required. Any deviation from the
requirements of this paragraph must first be cleared with the National
Office.\
(Revised 11-29-78, PN 650.)

D [Loss or Damage Covered]{.underline}. Buildings must be insured
against loss or damage by fire, lightning, windstorm, hail, explosion,
riot, civil commotion, aircraft, vehicles, and smoke.

E [Effective Date of Insurance]{.underline}. If there are insurable
buildings located on the property, the borrower will arrange with his
agent or company to have adequate insurance in force at the time the
loan, assumption, or credit sale is closed so that the policy will
properly insure the borrower and the mortgagees. When new buildings are
erected or major improvements are made to existing buildings, such
insurance will be made effective as of the date materials are delivered
to the property. The County Supervisor will make no payments from loan
funds for labor or materials until the borrower has furnished adequate
insurance to protect the interest of the Agency in the buildings being
erected or improved.

RD Instruction 426.1

II (Cont.)

F [Term]{.underline}. The borrower will be required to furnish insurance
for a term of at least one year with evidence that a full year\'s
premium is paid. The term \"premium\" as used herein includes any
assessments which may be charged to the borrower. If the assessments are
of the type imposed only after a loss occurs involving property insured
by the insurance company, then the borrower must present evidence (such
as a letter from the company) that he currently does not owe any such
assessments. The borrower may receive a discount for insuring for a
longer period such as three years or five years and with an annual
premium. If the insurance contains an automatic renewal clause, its
provision should be substantially the following to be acceptable to The
Agency:

\"This policy will be automatically extended for successive terms at
expiration of the original term and of each extension thereof, upon
payment of renewal premiums. It is a condition of this policy that if
the policy expires or is canceled for nonpayment of premium, or for any
other reason, the mortgagee will be given 10 days notice.\"

G [Mortgage Clause]{.underline}. The standard mortgage clause adopted by
the State must be attached to or printed in the policy, or Form RD
426-2, \"Property Insurance Mortgage Clause (Without Contribution),\"
must be attached to or the provisions thereof printed in the policy. A
letter signed by an authorized official of an insurance company to the
State Director, stating that all insurance policies the company issues
in the State and in which the Agency has a mortgage interest
incorporates all of the provisions of Form RD 426-2 may be accepted in
lieu of attaching Form RD 426-2 to each policy. If such a blanket letter
is used, the Agency will be named in the loss payable clause and a State
Instruction will be issued, after prior approval is obtained from the
National Office, authorizing the use of such method.

1 If the use of a mortgage clause, other than the standard mortgage
clause (without contribution), has been made mandatory by State laws or
insurance regulations, a State Instruction will be issued, after prior
approval is obtained from the National Office, authorizing the use of
such a form.

2 When an approved mortgage clause is printed in the policy a \"Loss
Payable Clause\" is acceptable provided the Agency, as mortgagee, would
receive payment in case of loss even though the company would not be
liable to the borrower. A \"Loss Payable Clause\" which contains the
statement that the mortgagee is \"subject to all terms and conditions of
the policy\" is not acceptable.

3 Whenever a new mortgage clause including the interest of the Agency is
issued after the policy has been in force, the new mortgage clause must
be signed by an authorized agent or officer of the company that issued
the policy. Form RD 426-6, \"Transmittal of Property Insurance Mortgage
Clause,\" may be used to transmit the mortgage clause to the insurance
official.

## Sheet 3

## (Revision 2)

(8-11-76) SPECIAL PN

II G (Cont.) RD Instruction 426.1

4 The Agency and all other mortgagees whose interests are insured by the
policy will be shown either in the mortgage clause or in the
\"Declaration Page\" in the order of priority of their mortgages.

a \"UNITED STATES OF AMERICA (Rural Development or Farm Service
Agency)\" will be named in the mortgage clause for direct and insured
loan mortgages naming The Agency as mortgagee, whether in its own right
or as trustee under a 2(f) or other agreement with a State Rural
Rehabilitation Corporation.

b \"UNITED STATES OF AMERICA (Rural Development or Farm Service Agency),
AS FIRST MORTGAGEE OR AS STATUTORY AGENT AND INSURER OF SUCH
MORTGAGEE,\" will be named in the mortgage clause for insured FO
mortgages naming the lender as mortgagee, whether the mortgage is held
by the original or a subsequent lender or by the insurance fund or by
The Agency under a trust agreement or declaration of trust.

c If the designation is not identical to that set forth in paragraph II
G 4 a or b, whichever is applicable, it will be sufficient if the
mortgagee is readily identifiable as Rural Development or Farm Service
Agency.

H Evidence of Premium Payment.

1 When Form RD 426-2 is attached to or the provisions thereof are
printed in the policy, or a blanket letter from an insurance company
incorporating the provisions of Form RD 426-2 in all policies in which
the Agency has a mortgagee interest is in effect in accordance with
paragraph II G, no evidence of premium or assessment payment is required
except for the first year of the loan. When a subsequent FP or Section
502 RH loan is made to build, buy, or rehabilitate essential buildings,
an endorsement to the existing policy, including coverage for the
property improved will be sufficient. (Revised 6-29-77 PN 576)

2 When a mortgage clause requires the mortgagee to pay the premium if
the insured does not, the borrower will be required to furnish, with the
policy, proper evidence that the premium has been paid for the full term
of the policy, unless a State Instruction has been issued in accordance
with paragraph II H 3 or an exception is otherwise authorized by the
National Office. The evidence of a premium payment may be (a) a receipt
(b) the policy or bill for the premium stamped \"Premium Paid,\" (c) the
endorsement renewing or continuing the policy stamped \"Premium Paid,\"
or (d) a letter or statement signed by the agent or company stating that
the premium has been paid. In case the policy is written by an
assessment mutual insurance company on an annual assessment basis,
proper evidence will accompany the policy to show that the most recent
annual assessment has been paid.

3 In those States in which laws or regulations do not permit the use of
Form RD 426-2, the State Director may issue a State Instruction which
sets forth the manner in which premium payment will be handled.

II (CONT.) RD Instruction 426.1

I [Policy Restrictions]{.underline}.

1 Any insurance on essential buildings as defined in paragraph III
having restrictions which limit the amount of collectable insurance must
meet the Agency requirements set forth below (except for the clause
described in subparagraph (d) which is never acceptable); otherwise,
such restrictions must be eliminated or modified to afford the required
protection.

a Coinsurance Clause. This clause generally provides that in
consideration of a reduced rate, the borrower agrees to maintain
insurance on his buildings up to a specified percentage (usually 80
percent) of their value and that the company will not be liable for a
greater proportion of any partial loss than the amount of the insurance
bears to the specified percentage of either the undepreciated
replacement value or the depreciated replacement value (actual cash
value) of the buildings at the time of the loss. When the buildings are
insured for the specified percentage of their value, the company, in the
event of a partial loss, will be liable for the full amount of the loss
not to exceed the amount of insurance. A coinsurance clause can be
accepted only where the amount of insurance is at least equal to the
specified percentage of either the undepreciated replacement value or
the depreciated replacement value (actual cash value). For example, an
80 percent coinsurance clause can be accepted only where the amount of
insurance on each insured building is at least equal to 80 percent of
the appropriate replacement value of the insured building.

b Three-Fourths\' Value Clause. This clause provides that the liability
of the company shall be limited to three-fourths of the depreciated
replacement value of the buildings covered at the time of the loss, not
to exceed the amount of insurance. This clause may be accepted if the
unpaid balance of the loan is not greater than three-fourths of the
depreciated replacement value of the building and the amount of
insurance is at least equal to the unpaid balance of the loan and any
prior liens and no building is insured for more than three-fourths of
its depreciated replacement value.

c Loss Deductible Clause.

\(1\) For all loans other that RRH, RCH, and LH organizations this
clause generally provides that loss to each building to the extent of
the limitation is not recoverable. The company is liable only for loss
to each building in excess of such limitation stated in the clause. This
clause may be accepted where the limitation does not exceed \$150, or
one percent of the insurance coverage which is greater. In no case,
however, may the limitation on any one building exceed \$500.00.
(Revised 6-25-86, PN 14.)

## Sheet 4

## (Revision 2)

(8-11-76) SPECIAL PN

\(2\) For RRH, RCH, and LH organization loans this clause generally
provides that loss to each project to the extent of the limitation is
not recoverable. The company is liable only for loss to each project in
excess of such limitations stated in the clause. This clause may be
accepted where the limitation does not exceed the option shown below
that is chosen by the borrower and agreed to by the Loan Approving
Official and properly annotated in the borrower file. The borrower and
The Agency Official should consider the economic impact to the project
when selecting the appropriate option.

\(i\) Option 1 - Up to one-forth of one percent (0.0025) of the
insurable value. Maximum deductible \$5,000.

\(ii\) Option 2 - Up to a maximum deductible of \$500 on any project
with an insurable value not exceeding \$200,000.

\(iii\) Option 3 - Option 1 may be chosen and increased above the
maximum deductible by an amount equivalent to funds specifically
escrowed in the project replacement reserve account as an offset to the
increased deductible.

\(iv\) Option 4 - Option 2 may be chosen and increased above the maximum
deductible by an amount equivalent to funds specifically escrowed in the
project replacement reserve account as an offset to the increased
deductible.

\(v\) The funds used to increase the deductible in Option 3 or Option 4
may be from project funds if it does not create an unsecured financial
situation for the project. Also, non-project funds may be used for
Option 3 or 4 and then repaid by withdrawal from the project at the rate
of 75 percent of the annual insurance premium savings earned by the
amount of escrow deposit, up to the amount deposited.

\(vi\) The funds escrowed to increase the authorized deductible will be
placed in the project reserve account as an increased amount in and
above the amount required by the Loan Agreement/Resolution and so
annotated in the borrower\'s accounting system.

II I (Cont.) RD Instruction 426.1

d Three-Fourths\' Loss Clause. This clause provides that the company
will not pay more than three-fourths of any loss, no more than
three-fourths of the amount of insurance in force. This clause is never
acceptable and must be eliminated.

e Deferred Loss Payable Clause. This clause provides that, if the amount
payable under the policy for any loss to any building insured shall be
in excess of a specified portion, (usually 60 percent) of the amount of
insurance on such building, the company will withhold from its initial
loss payment any sum in excess of the specified portion of the amount of
insurance on such building. If the building sustaining such loss is
repaired or replaced within six months from the date of the fire and at
or within 300 feet of the original location, as described in the policy,
the company upon receipt of evidence to that effect from the insured
will pay the full balance withheld from the initial payment, provided
the amount expended in repairing or replacing the building as determined
under the terms of the policy. Failure to repair or replace any insured
building within the time and manner provided will constitute acceptance
of the initial payment as full and final settlement under the policy
with respect to the loss. This clause may be accepted if the amount of
insurance is for the full depreciated replacement value (actual cash
value) of the building and the unpaid balance of the loan and any prior
lien(s) is not greater than the initial loss payment made by the
company.

f Construction Specification and Use Conditions. If the insurance policy
contains clauses which specify certain standards of construction or
prescribes certain uses of the property for the insurance to be valid,
the policy is acceptable only if the property meets such specifications
or conditions at the time of acceptance. For example, if the policy
provides that the chimney be constructed of a certain type of material,
the County Supervisor should be assured that the required material has
been used, or if the policy provides that farming operations are not
carried out on the premises he should be assured that this condition is
met.

2 Policies generally will not be accepted if, under the terms of the
policies or local laws, contributions or assessments may be made against
the The Agency; however, policies which impose assessments on the
borrower may be accepted only if the Agency mortgage will be recorded
prior to any failure of the borrower to pay any such assessments.
Policies also will not be accepted if, by their terms or other
conditions, loss payments are contingent upon collective action by the
Board of Directors, or the stockholders, or the members.

## Sheet 4A

## (Added 6-25-86, PN 14) 

RD Instruction 426.1

II (Cont.)

J. [Buildings on Leaseholds]{.underline}. The policy will indicate that
the insured is the lessee or tenant and not the owner of the buildings
securing the Agency loan; or, if he is the owner of the building on the
leased land, the policy will indicate that the insured is the owner of
the building, but not of the land. State Directors, with the advice of
the OGC will issue State Instructions to meet any other special
requirements needed to conform with the insurance requirements of the
State to enable leaseholders to obtain property insurance for buildings
which are security for The Agency loans.

III [COVERAGE REQUIREMENTS]{.underline}: The County Supervisor should
encourage the borrower for his own protection to insure for their
depreciated replacement value (actual cash value) all essential
buildings. Essential buildings include the dwelling and any other
buildings that are necessary for the operation of the property or that
provide income to assure orderly repayment of the loan. If insurance is
for less than the depreciated replacement value of all essential
buildings, the County Supervisor will see that the coverage is obtained
on one or more of the most essential buildings. The minimum amount of
coverage will be furnished as prescribed below:

A [Loans Secured by a First Lien]{.underline}.

1 When the unpaid balance of the Agency loan secured by a first lien is
equal to or greater than the depreciated replacement value of the
essential buildings, or the cost of adequate essential buildings which
can be constructed for amounts less than the depreciated replacement
value of the existing buildings, the essential buildings will be
insured, to the nearest multiple of insurance that is available, for the
lesser of (a) their depreciated replacement value, or (b) the cost of
constructing adequate essential buildings. For example, if insurance is
available in only multiples of \$1,000, the minimum insurance required
on an essential building valued at \$6,600 would be \$7,000, and that
required on an essential building valued at \$6,400 would be \$6,000.

2 When the unpaid balance of the loan is less than the sum of the
depreciated replacement value of the essential buildings to be insured,
the total amount of insurance must be at least equal to the lesser of
(a) the unpaid balance of the loan, or (b) the cost of adequate
essential buildings which can be constructed for amounts less than the
depreciated replacement value of the existing buildings to be insured.

## Sheet 5

## (Revision 1)

(8-11-76) SPECIAL PN

RD Instruction 426.1

III A (Cont.)

3 When, by the use of loan funds or otherwise, buildings are erected or
substantial improvements are made to essential buildings, the amount of
insurance will be adjusted in accordance with paragraph III A 1 or 2,
whichever is applicable.

B [Loans Secured by Other Than First Liens]{.underline}. The amount of
insurance on buildings in the case of The Agency loans secured by other
than a first lien will be the same as required in paragraph III A, with
the understanding that the unpaid balance of the loan will be deemed for
this purpose to be the amount of the total real estate mortgage
indebtedness owed all prior mortgagees named in the mortgage clause,
plus the debt to the Agency which is secured by real estate mortgage.

C [Exception of Buildings from Insurance]{.underline}.

1 Insurance will not be required on a building:

a That is not essential.

b In such a state of disrepair that the cost of insurance would be
prohibitive.

c Which has a depreciated replacement value of \$2,500 or less.

d Which is being or has been repaired with a Section 504 loan of \$7,500
or less. Families receiving Section 504 loans should be encouraged but
not required to carry insurance on their home. (Revised 03-25-91,
SPECIAL PN.)

e On LH security property which was not built or repaired with The
Agency loan funds provided that the State Director determines that the
land and other structures adequately secure the The Agency loan and any
prior liens.

f On which the hazards are so slight because of the character and
construction of the building, or the cost of the insurance is so high in
comparison with the value of the building that, according to common
standards of judgment, it should not be insured, including but not
limited to windmills, silos, and fire-cured tobacco barns.

2 In cases where the unpaid balance of the Agency loans and any prior
liens have been reduced to \$2,500 or less, property insurance need not
be required if the borrower wants to discontinue it, provided the County
Supervisor determines that the value of the land security itself is
sufficient to protect the Agency in its collection of the amount of the
outstanding indebtedness.

RD Instruction 426.1

III C (Con.)

3 If insurance for windstorm and hail to meet all The Agency
requirements is not available in a hurricane area, the County Supervisor
may accept from the borrower or applicant the windstorm and hail
insurance policy that most nearly conforms to The Agency requirements.
If such an exception is made, the situation should be fully documented
in the borrower\'s case file. However, if the best insurance policy a
borrower or applicant can obtain at the time he receives a loan contains
a loss deductible clause for windstorm and hail damage exceeding \$250
or 10 percent of the actual cash value of the buildings, whichever
amount is greater, the insurance policy, with an explanation of the
reasons why more adequate insurance is not available will be submitted
to the State Office for prior approval.

## Sheet 5A

## (Added 03-25-91, SPECIAL PN)

(8-11-76) SPECIAL PN

RD Instruction 426.1

IV [EXAMINING AND GENERAL SERVICING OF INSURANCE]{.underline}:

A [Examination by County Office of Policies, Endorsements, Binders, and
Other Evidence of Insurance]{.underline}. Upon receipt in the County
Office of a policy, endorsement, binder, or other evidence of insurance,
submitted by a borrower, it will be examined promptly for compliance
with the requirements of this Instruction. If the evidence of insurance
is found to be acceptable, it will be placed in the borrower\'s case
folder.

1 UNACCEPTABLE POLICIES.

a When the borrower furnishes any policy or other evidence of insurance
which does not meet the requirements of this Instruction, such policy or
other evidence of insurance will be returned to the borrower with the
reasons why it is nor acceptable.

b If the borrower does not furnish acceptable insurance by the date the
previous policy expired or was cancelled, the County Supervisor will
proceed as provided in paragraph VI.

2 [EXPIRATION RECORDS AND NOTICES]{.underline}. (Revised 02-24-05,
SPECIAL PN.)

a In cases other than those involving FP or Section 502 RH borrowers,
the County Supervisor will notify the borrower of the expiration of his
insurance at least 30 days in advance of such expiration unless he has
received written evidence that the insurance has been renewed. (Revised
8-30-89, PN 116)

b FP and Section 502 RH borrowers will be informed, during the tenth
month after the date of loan closing of their responsibility to carry
insurance. Form RD 426-4 will be sent to those borrowers, regardless of
whether there is evidence that the insurance has been renewed.
Thereafter the County Supervisor will not be required to further
determine whether the borrower has adequately maintained insurance;
however, if a further notice of expiration is received in the County
Office, the County Supervisor will again notify the borrower by using
Form RD 426-4 of his responsibility. (Revised 6-29-77 - PN 576.)

3 [RELEASE OF MORTGAGE INTEREST]{.underline}. When the borrower\'s loan
has been paid in full and the satisfaction or release of the

## Sheet 6

## (Revision 5)

(8-11-76) SPECIAL PN

IV A (Cont.) RD Instruction 426.1

mortgage has been executed, the County Supervisor or his delegate will
execute the following Release of Mortgage Interest on the mortgage
clause attached to the policy or other evidence of insurance and
transmit it with the policy or other evidence of insurance, the
paid-in-full note, and the satisfaction to the borrower:

\"It is understood and agreed that the interest of the United States of
America in the property insured hereunder ceased as of [(Date of Final
Payment)]{.underline}, and that the Government shall have no interest in
any loss or damage to such property occurring thereafter.\"

4 LOST OR MISPLACED POLICIES. When an unexpired insurance policy or
other evidence of insurance is lost or misplaced, it will be necessary
to obtain a replacement policy or other evidence of insurance. The
County Supervisor is authorized to sign a lost Policy Receipt on behalf
of the Agency. For FP and Sec. 502 RH loans, this paragraph applies only
during the period the policy is retained in the County Office.

5 DISPOSITION OF EXPIRED AND CANCELLED POLICIES. An expired or cancelled
policy or other evidence of insurance will be returned to the borrower,
unless (1) there is a loss settlement pending.

B [Special Servicing of Insurance]{.underline}.

1 VACANCY OR UNOCCUPANCY - TENANT OCCUPANCY - INCREASED HAZARD. If the
County Supervisor has knowledge that insured property is vacant or
unoccupied or that the hazards otherwise are increased, he will examine
the policy to determine whether the policy permits such conditions.
Unless the insurance permits such conditions, the County Supervisor will
immediately notify the company or agent in writing. In any case where
there is an additional premium due because of vacancy, unoccupancy,
tenant occupancy, or other increased hazard, and upon demand to The
Agency from the company or agent because the borrower cannot, or will
not, pay the additional premium, it may be paid in accordance with RD
Instruction 2024-A, to the company or agent. For FP and Section 502 RH
borrowers, property insurance will not be obtained except in cases where
an unusual and severe hazard exists and insurance is necessary to
protect the interests of the Government. (Revised 08-13-92, SPECIAL PN.)

2 TRANSFER OF PROPERTY.

a When a borrower or transferee requests the consent of The Agency to a
transfer the security property which already has been made, or when the
County Supervisor learns that any such transfer has been made, he will
immediately inform, the transferee that the mortgage requires the owner
to provide and maintain adequate insurance acceptable to, and with loss
payable to, The Agency as mortgagee. The transferee may obtain a new
insurance policy or the transferor may have the insurance company or
agent issue an endorsement to the current insurance policy changing the
name of the assured to that of the transferee. If a new insurance policy
is obtained, the old

RD Instruction 426.1

IV B 2 a (Cont.)

policy or other evidence of insurance will be returned to the transferor
unless there is an unsettled loss. If there is an unsettled loss, the
policy or other evidence of insurance will not be returned until the
claim has been settled. The County Supervisor, with the concurrence of
the State Director and the OGC, will notify the borrower and transferee
that acceptance of the new policy or endorsement will not constitute
consent by the Government to the transfer even though the Government is
protected by a loss payable clause in such an insurance policy.

b In a transfer with assumption, insurance will be required in the same
amount and according to the same provisions as for an initial loan of
the same type. (Revised 10-30-85, SPECIAL PN.)

3 VOLUNTARY CONVEYANCE OF PROPERTY TO THE GOVERNMENT AND FORECLOSURE.
Insurance will not be carried on buildings which the Government has
acquired. After a foreclosure sale has been held, or after a deed of
conveyance to the Government in lieu of foreclosure has been filed for
record, insurance will not be maintained by the Government (whether or
not subject to redemption).

V [Losses]{.underline}.

A [Protecting Property]{.underline}. It is the responsibility of the
borrower to immediately notify the County Supervisor and insurance
company or agents of any loss or damage to insured property and collect
the amount of the loss. When the County Supervisor learns of a loss to
property which secures an The Agency loan, he will:

1 Check the borrower\'s casefile for an insurance policy or other
evidence of insurance. When a policy or other evidence of insurance has
not been retained by the Agency, such as for FP and Section 502 RH
borrowers, the County Supervisor will determine whether the property was
insured and whether The Agency was named as mortgagee in the insurance
policy.

2 Determine that the borrower bas taken such steps as are necessary to
protect the interest of the Agency in the security property against
further damage. When serious problems arise with respect to protecting
the property from further damage, the borrower cannot or will not
arrange adequate protection for the property, or when legal action
appears to be necessary, the County Supervisor will arrange for
emergency protection and immediately refer the case with complete
information to the State Director.

## Sheet 7

## (Revision 1)

(8-11-76) SPECIAL PN

V (Cont.) RD Instruction 426.1

B [Loss Covered by Insurance]{.underline}.

1 If the Agency is listed as mortgagee in the insurance policy, the
County Supervisor will collect the amount of the loss and may consent to
the borrower using the funds to repair or replace damaged or destroyed
property or to apply the loss proceeds to his loan account or to any
prior liens that might exist in the order of their priority.

2 If the The Agency is not listed as mortgagee in the insurance policy,
the County Supervisor will contact the borrower to determine whether he
has received the loss proceeds. If the borrower has received the loss
proceeds but not yet paid for improvements to repair or replace the
property, or has not received the loss proceeds the County Supervisor
will:

a Notify the insurance company in writing of the Agency\'s interest in
the security property and request that the loss proceeds be made payable
jointly to the Agency and the borrower.

b Inform the borrower of his responsibility for repairing or replacing
the damaged or destroyed property or for authorized disposition of the
loss proceeds as outlined in paragraph V B 1.

3 [Loss Drafts - When Loan is Secured by a First Mortgage]{.underline}.

a A loss draft which in the opinion of the County Supervisor represents
a satisfactory adjustment of the loss will be endorsed immediately
without recourse (see RD Instruction 1951-B) and deposited in a
supervised bank account to be used in repairing or replacing the damaged
building, except: (Revised 6-20-79, PN 679)

\(1\) When the amount of the loss is \$1,000 or less and the borrower
will use the funds for repairing or replacing an essential building, the
loss draft may be endorsed without recourse and given to the borrower
upon satisfactory proof that the repairs or replacements have been made,
or upon satisfactory assurance that the work will be performed.

\(2\) When (1) the essential buildings are not to be repaired or
replaced and other suitable buildings are not to be erected, or (2) a
balance remains after all repairs, replacements, and other authorized
disbursements have been made, such insurance funds will be applied on
prior liens or as an extra payment to the borrower\'s loan accounts
secured by the real estate or disposed of in accordance with the general
principles applicable to the use of proceeds from the sale of a part of
the security contained in applicable security servicing regulations for
the type loan involved. (Revised 10-30-85, SPECIAL PN.)

RD Instruction 426.1

V B 3 a (Cont.)

\(3\) An insurance payment for loss or damage to a nonessential building
the borrower voluntarily insured will be (1) applied on prior liens, or
to current delinquencies to The Agency or as an extra payment on the
borrower\'s loan accounts secured by real estate, (2) disposed of as
authorized by the State Director in accordance with the general
principles applicable to the use of proceeds from the sale of a part of
the security contained in applicable security servicing regulations for
the type loan involved; or (3) used for other purposes as authorized by
the State Director if the loan is adequately secured and the loan
account is current. (Revised 10-30-85, SPECIAL PN.)

\(4\) When the indebtedness secured by the insured property has been
paid in full or the draft is in Payment for loss of property on which
the Agency has no claim, a loss draft which includes the Agency as a
joint payee may be endorsed without recourse and delivered to the
borrower.

4 [Loss Drafts - When Loan is Secured by Other than First
Mortgage]{.underline}.

a When the loss draft does not include the interest of a prior
mortgagee, it will be processed as provided in paragraph V B 3.

b When the loss draft includes the interest of a prior mortgagee, the
County Supervisor is authorized to endorse and process the draft as
follows:

\(1\) When the prior mortgagee will permit the use of such loss funds to
repair or replace the damaged building, the draft may be endorsed
without recourse upon satisfactory proof that the repairs or
replacements have been made or upon satisfactory assurance that the work
will be performed.

\(2\) When the amount of the draft does not exceed the amount of the
indebtedness then secured by the prior mortgage as stated in writing by
the holder of the prior mortgage, and the holder of the prior mortgage
has agreed in a written statement to the County Supervisor that he will
apply such funds as a payment on the borrower\'s prior mortgage
indebtedness, the draft may be endorsed without recourse.

\(3\) When the amount of the draft exceeds the amount of the
indebtedness then secured by the prior mortgage, as stated in writing by
the holder, and he has agreed in writing to pay such indebtedness from
the loss funds, the draft will be endorsed without recourse only after
all parties named as payees in the draft have signed an agreement to
deliver the draft \"in escrow\" to a bank acceptable to the named
parties. The agreement will specify the manner in which the funds will
be disbursed by the bank, as escrow agent, to the several

## Sheet 8

## (Revision 1)

(8-11-76) SPECIAL PN

V B 4 (Cont.) RD Instruction 426.1

mortgagees named in the draft. After the loss funds have been collected
by the bank, it will issue cashier\'s checks in the manner prescribed in
the escrow agreement (see Exhibit A for suggested form). If this
procedure is found to be impractical in an individual instance, the
State Director may authorize an alternative method for disbursing the
loss funds to protect the Government\'s financial interest.

\(4\) Drafts which have been endorsed by all other payees will be
endorsed immediately without recourse. Such drafts or other loss funds
will be processed in accordance with the methods described in paragraph
V B 3.

5 [Servicing Insurance Losses Under Special Circumstances]{.underline}.

a [FORECLOSURES AND VOLUNTARY CONVEYANCES]{.underline}. Losses on
properties in process of foreclosure or voluntary conveyance will be
handled with the advice of the OGC. If the necessary cooperation of the
borrower cannot be obtained, the State Director, with the advice of the
OGC, will determine the proper action to be taken. To the extent
feasible from a legal and practical standpoint, all loss payments should
be received for a damaged or destroyed building and applied on the
borrower\'s real estate indebtedness before title to the property is
taken by the Government through foreclosure sale, voluntary conveyance,
or otherwise, unless absolute assignment has been made by the borrower
to the Government of all loss funds due from the insurance company.

b [SUBROGATION AGREEMENTS]{.underline}. When a company claims
nonliability to the borrower and subrogation to the rights of the
Agency, the County Supervisor will forward a full report of the facts in
the case to the State Director. The State Director will, upon advice
from OGC, instruct the County Supervisor regarding further action to be
taken.

6 [Repairs and Replacements]{.underline}. When any loss payments have
been deposited in a supervised bank account, all repairs and
replacements done by or under the direction of the borrower, or by
contract, will be planned, performed, inspected, and paid for in the
same manner as improvements financed with loan funds.

7 [Completing Adjustment]{.underline}. The borrower must complete the
adjustment of the loss with the company or its authorized
representatives. The County Supervisor, upon request of the borrower may
consult with the borrower regarding the loss adjustment, but will not
enter into negotiations with insurance adjusters or company
representatives relative to the adjustment or settlement of losses on
borrower property, or make any commitments, or sign any forms in
connection with the adjustment of the loss. The Agency will not waive
any rights which it may have against the company except when the
borrower\'s account or the Agency claim has been paid-in-full.

RD Instruction 426.1

V B 7 (Cont.)

a The County Supervisor will maintain a proper followup on all losses
until satisfactory settlement has been made by the company.

b When the County Supervisor has evidence that the adjustment agreed to
by the borrower is significantly less than the amount of damage to which
the borrower is entitled under the terms of the policy, the loss draft
accompanied by a report will be sent to the State Director so that
he/she may reopen the adjustment, if he/she considers it is in the
interest of the Rural Development to do so.

c When it appears evident that the amount of the loss is \$1,000 or
less, the County Supervisor may rely on estimates of contractors,
building supply firms, reliable carpenters, or other evidence rather
than personal inspection in determining whether the adjustment is
equitable and the Government\'s interest is protected.

8 [Reinstatement After Loss]{.underline}. In cases where insurance in
the amount of the loss is not reinstated automatically by the provisions
of the policy, it will be the responsibility of the County Supervisor to
have the borrower reinstate as much of the insurance as may be necessary
to fulfill the requirements of the Rural Development.

C [Losses not Covered by Insurance]{.underline}. When a loss occurs and
insurance is not in force, the County Supervisor will:

1 Inform the borrower that he has violated the security instrument by
not providing insurance coverage and that it is his responsibility to
make the needed replacements or repairs.

2 If the borrower is unable or unwilling to make needed repairs or
replacements from his own resources, the County Supervisor will submit
complete information to the Rural Development official authorized to
determine whether Rural Development will or will not continue with the
loan. The County Supervisor\'s report will include recommendations on
the following items:

a The advisability and possibility of making a subsequent loan to pay
for needed repairs.

b Subordination of the Rural Development real estate lien to permit the
borrower to obtain funds for needed repairs from another source.

## Sheet 9

## (Revision 2)

(08-11-76) SPECIAL PN

RD Instruction 426.1

V C (Cont.)

c The possibility of the borrower obtaining funds secured by a junior
lien from another source.

d Whether an advance is needed to protect the Government\'s interest in
the property.

3 If the loan will not be continued with the borrower, it must be
serviced in accordance with the applicable Instructions.

4 If the borrower has improperly disposed of loss proceeds, the County
Supervisor will refer the case with complete information and
recommendations to the State Director. The State Director will consult
the Regional Attorney when necessary and advise the County Supervisor as
to appropriate servicing actions.

VI [FAILURE OF BORROWER TO PROVIDE INSURANCE]{.underline}: When a
borrower fails to provide and maintain property insurance which meets
the requirements set forth in paragraph II of this Instruction, every
effort will be made to have the borrower provide coverage acceptable to
Rural Development. It will be emphasized that under the terms of the
security instrument, it is the borrower\'s responsibility to provide and
maintain proper insurance coverage. Existing borrowers required to
escrow will be notified by letter at least 90 days prior to initiating
escrowing for insurance. Failure to provide insurance is a nonmonetary
default and will be a consideration in determining if the loan is to be
continued. For FP or SFH borrowers [not]{.underline} required to escrow,
the County Supervisor will obtain insurance coverage and voucher for the
insurance premium only in cases where: (1) an unusual and severe hazard,
such as recurring fires or unstable ground conditions, exists, or (2) an
SFH borrower on a moratorium is unable to pay the insurance premium and
the borrower requests that Rural Development pay the premium. For SFH
borrowers required to escrow, force placed insurance will be obtained if
the borrower fails to provide acceptable insurance. Borrowers being
phased into escrow will be given at least 30 days to obtain coverage,
after which force placed insurance will be obtained. If the escrow
account contains insufficient funds to pay the insurance when due, the
County Supervisor will request the borrower to pay an amount equal to
the difference between the premium due and the escrow balance in a lump
sum within 30 days after notification. If the borrower fails to remit
the amount requested, the amount will be advanced and charged to the
borrower\'s account as a recoverable cost. The amortization period for
an advance due to an escrow shortage will be one year. Insurance
coverage shall be provided continuously unless the property is acquired
by Rural Development. The cost of obtaining such a policy shall be
advanced and charged to the borrower\'s account as a recoverable cost.
Amortization of the charge will be handled in accordance with 7 CFR part
3550. If a borrower indebted for other than an FP or SFH loan fails to
provide acceptable insurance, the Servicing Official will take the
following action: (Revised 01-23-03, SPECIAL PN.)

RD Instruction 426.1

VI A 1 (Cont.)

A [Expired Policies]{.underline}.

1 The County Supervisor will request the insurance agency or broker who
issued the expired policy to issue a new policy which is acceptable to
the Rural Development.

a The new policy will be effective as of the date of the County
Supervisor\'s contact with the insurance agency or broker or as soon
thereafter as possible, and will be for a term of one year. If State
insurance regulations require a longer term, the State Director will
issue a State Instruction authorizing County Supervisors to obtain
policies for the minimum period permitted by State insurance
regulations.

b The Rural Development will be shown in the loss payable clause and in
the mortgage clause in the proper order of priority.

c Insurance coverage on each building usually will be the same as shown
on the expired policy if it meets or exceeds Rural Development
requirements. If the coverage shown on the expired policy does not meet
Rural Development requirements, proper coverage will be obtained.

d The County Supervisor will, if possible, have an automatic renewal
provision included in the policy.

## Sheet 9A

## (Revision 1)

(8-11-76) SPECIAL PN

RD Instruction 426.1

VI A (Cont.)

2 If the borrower refuses to pay the insurance premium with his own
funds or arrange with the agent for subsequent payment by premium note
or otherwise, the County Supervisor will pay the amount of the insurance
premium in accordance with RD Instruction 2024-A. The amount of the
premium payment will be charged to the borrower\'s The Agency account
with the highest lien priority as a recoverable cost item. (Revised
08-13-92, SPECIAL PN.)

3 If the insurance agency or broker who issued the expired policy
refuses to issue a new policy, the County Supervisor will have the
borrower designate in writing another insurance agency or broker from
whom the insurance can be obtained.

4 After the County Supervisor and the borrower exhaust all efforts to
obtain acceptable insurance, the County Supervisor will request advice
from the State Office as to companies issuing acceptable policies in the
State and from which the borrower might be able to obtain an acceptable
policy. If the borrower still cannot obtain an acceptable policy from
any such company, and the determination has been made to continue with
the borrower, the County Supervisor will temporarily accept from the
borrower the available insurance policy The Agency determines most
nearly conforms to the requirements of paragraph II. (Revised 10-30-85,
SPECIAL PN.)

a In making this determination, the following deficiencies become more
objectionable in the order from (1) to (5) below.

\(1\) A policy written for an initial term of less than one year.

\(2\) A policy which will insure the most essential buildings but will
not cover all essential buildings.

\(3\) A policy which covers major risks such as fire and lightning, but
does not include one or more of the other risks specified in paragraph
II D.

\(4\) A policy for a lesser amount of insurance than is required by
paragraph III.

\(5\) A policy that is issued by a company which is not licensed to do
business in the State or otherwise does not meet the requirements of
paragraph III.

b Whenever adequate insurance becomes available, the County Supervisor
will require the borrower to deliver to the County Office an acceptable
insurance policy. The temporary policy will be returned to the borrower
for Cancellation after all losses claimed under the policy have been
settled.

## Sheet 10

## (Revision 2)

(8-11-76) SPECIAL PN

RD Instruction 426.1

VI A 4 (Cont.)

c If the borrower is unable to furnish a property insurance policy of
any kind, he is still responsible for the debt in the event of loss.

d If the County Supervisor accepts an inadequate insurance policy under
these conditions or the borrower fails to furnish any insurance policy,
the County Supervisor will include in his report to the State Director
an explanation of the efforts he and the borrower made to obtain
acceptable insurance and his justification for accepting an inadequate
policy, or for not obtaining an insurance policy of any kind.

B [Insurance Canceled for Reasons Other Than Nonpayment of Insurance
Premium]{.underline}.

1 The County Supervisor, immediately upon receipt of a 10-day notice of
cancellation for a policy, will urge the borrower to provide acceptable
insurance.

2 If the borrower fails to provide acceptable insurance before the
cancellation is effective, the County Supervisor will contact the
insurance agency or broker who issued the insurance policy to determine
the reasons for cancellation and, if possible, have the policy
reinstated.

3 If the insurance company will not reinstate the policy, the County
Supervisor will attempt to obtain an acceptable insurance policy from
another agency or broker in accordance with the provisions of paragraph
VI A.

C [Insurance Canceled for Nonpayment of Premium]{.underline}.

1 The County Supervisor, immediately upon receiving a 10-day
cancellation notice for a policy, will, if possible, contact the
borrower in an effort to have him pay the insurance premium from his own
funds or arrange with the agent for subsequent payment by premium note,
or otherwise.

2 If the borrower does not pay or arrange to pay the premium before the
policy cancellation is effective, the County Supervisor will, before the
cancellation becomes effective, notify the insurance company or broker
by certified mail, (return receipt requested), that the The Agency as
mortgagee (or trustee) will pay the premium for one year to continue the
policy in effect for that period. The County Supervisor will, in
accordance with RD Instruction 2024-A, pay the amount of the premium for
a period of one year. The amount of the premium will be charged to the
borrower\'s loan account as a recoverable cost item. (Revised 08-13-92,
SPECIAL PN.)

RD Instruction 426.1

VI C (Cont.)

3 If a property insurance mortgage clause other than Form RD 42602 is
used in connection with the policy and the insurance company or broker
refuses to accept payment from the Agency in this manner to reinstate or
continue the policy, the County Supervisor will attempt to obtain an
acceptable insurance policy from another insurance company or broker in
accordance with the provisions of paragraph VI A.

Attachment: Exhibit A.

## oOo

## Sheet 11

## (Revision 3)

(8-11-76) SPECIAL PN

RD Instruction 426.1

Exhibit A

## ESCROW AGREEMENT

## REAL PROPERTY INSURANCE

Date \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

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

(Name of Bank)

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

(City or Town)

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

(State)

Gentlemen:

Attached is Draft No.\_\_\_\_\_\_\_\_\_\_, for \$\_\_\_\_\_\_\_\_\_\_,
issued by the \_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Insurance Company in payment of \_\_\_\_\_\_\_\_\_\_\_\_ loss which
damaged the buildings on the farm of\_\_\_\_\_\_\_\_\_\_\_\_\_,
of\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
County, State of\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

This draft has been endorsed by the undersigned payees who request that
you collect these funds and issue cashier\'s checks to the following
payees for the following amounts:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
First Mortgagee \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
Second Mortgagee \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,
Third Mortgagee \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_

The balance only, if any, will be paid to
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, the
owner of the property.

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

First Mortgagee

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

Second Mortgagee

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

Third Mortgagee

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

Owner

## o O o

(8-11-76) SPECIAL PN