RD Instruction 1955-A

Table of Contents

Page 1

PART 1955 - PROPERTY MANAGEMENT

Subpart A - Liquidation of Loans Secured by Real Estate and

Acquisition of Real and Chattel Property

## [Table of Contents]{.underline}

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

1955.1 Purpose. 1

1955.2 Policy. 1

1955.3 Definitions. 2

Closing agent. 2

CONACT or CONACT property. 2

Farmer Program loans. 2

Government. 2

Homestead protection. 2

Interest credit. 2

Loans to individuals. 2A

Loans to Native Americans. 2A

Loans to organizations. 2A

Market value. 3

Nonrecoverable cost. 3

OGC. 3

Prior lien. 3

Recoverable cost. 3

Servicing official. 3

1955.4 Redelegation of authority. 3

1955.5 General actions. 4

\(a\) Assignment of notes to Rural Development. 4

\(b\) Execution of documents. 4

\(c\) Unused loan funds. 5

\(d\) Payment of costs. 5

\(e\) Escrow funds. 5

1955.6 - 1955.8 \[Reserved\] 5

1955.9 Requirements for voluntary conveyance of real

property located within a federally recognized

Indian reservation owned by a Native American

borrower-owner. 5

(09-10-03) PN 363

RD Instruction 1955-A

Table of Contents

Page 2

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

1955.10 Voluntary conveyance of real property by the

borrower to the Government. 6B

\(a\) Authority. 6C

\(b\) Forms and documents. 7

\(c\) Liens against the property other than

Rural Development liens. 7

\(d\) Offer of voluntary conveyance. 8

\(e\) Appraisal of property. 10

\(f\) Processing offer to convey security and acceptance

by Rural Development. 10

\(g\) Closing of conveyance. 14

\(h\) Actions to be taken after closing conveyance. 15

1955.11 Conveyance of property to Rural Development by trustee in

bankruptcy. 16

\(a\) Authority. 16

\(b\) Fees and deed. 16

\(c\) Acceptance. 17

\(d\) Reporting. 17

1955.12 Acquisition of property which served as security for a

loan guaranteed by Rural Development or at sale by another

lienholder, bankruptcy trustee, or taxing authority. 17

1955.13 Acquisition of property by exercise of Government

redemption rights. 17

1955.14 Release of a junior lien on HUD/Rural Development

joint security. 17

1955.15 Foreclosure by the Government of loans secured by real

estate. 18

\(a\) Authority. 18

\(b\) Problem case report. 19

\(c\) Submission of problem case. 20

\(d\) Approval of foreclosure. 20A

\(e\) Referral of case. 26

\(f\) Completion of foreclosure. 27

\(g\) Reports on sale and finalizing foreclosure. 29

RD Instruction 1955-A

Table of Contents

Page 3

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

1955.16 - 1955.17 \[Reserved\] 29

1955.18 Actions required after acquisition of property. 29

\(a\) Reporting acquisition. 29

\(b\) Existing lease. 30

\(c\) Existing management agreement. 30

\(d\) Inventory account. 30A

\(e\) Credit to the borrower\'s account or foreclosure

judgment account. 31

\(f\) Unsatisfied account. 32

\(g\) Deficiency judgment. 32

\(h\) Homestead protection. 32

\(i\) Priority disposal of inventory property. 33

\(j\) Debt Settlement. 33

\(k\) Effect of acquisition on tenants in multi-family

projects. 33

1955.19 \[Reserved\] 33

1955.20 Acquisition of chattel property. 34

\(a\) Purchase at the following types of sale. 34

\(b\) Voluntary conveyance. 34

\(c\) Attending sales. 34A

\(d\) Appraising chattel property. 35

\(e\) Abandonment of security interest. 35

\(f\) Bidding at sale. 35

\(g\) Payment of costs. 36

\(h\) Reporting acquisition of chattel property. 36

1955.21 Exception authority. 36

1955.22 State Supplements. 36

1955.23 - 1955.49 \[Reserved\] 36

1955.50 OMB control number. 37

Exhibits to Subpart A

Exhibit A - Report on Multiple-Family Housing Problem Case.

Exhibit B - Format for Notice of Acceleration to Borrowers\
Other Than FP and MFH Personally Liable for the\
Debt (Excludes Borrowers Who Were Discharged in\
Bankruptcy and Did Not Reaffirm the Debt).

(09-10-03) PN 363

RD Instruction 1955-A

Table of Contents

Page 4

Exhibit C - Format for Notice of Acceleration to Borrowers Other Than FP
and

MFH Discharged in Bankruptcy Who Have Not Reaffirmed the Debt.

Exhibit D - Notice of Acceleration of Farmer Program Loan Accounts
Secured by\
Real Estate and/or Chattels in Cases [not]{.underline} Involving
Bankruptcy.

Exhibit E - Notice of Acceleration of Farmer Program Loan Accounts
Secured by\
Real Estate and/or Chattels in Cases Involving Bankruptcy

Exhibit E-1 Notice of Acceleration of Farmer Program Loan\
Accounts Secured by Real Estate and/or Chattels in Cases\
Involving Chapter 11, 12, and 13 Bankruptcy Borrowers.\
(Use only with OGC\'s approval for borrowers discharged under\
Chapters 11, 12, or 13)

Exhibit F - Notice of Rural Development Debt Still Owed and\
Advising of the Availability of Debt Settlement.

Exhibit G - Worksheet for Accepting a Voluntary Conveyance of\
Farm Loan Programs Security Property into Inventory.

Exhibit G-1 Worksheet for Determining Farm Loan Programs Maximum\
Bid on Real Estate Property.

Exhibit H - Format for Notice of Acceleration to MFH Borrowers\
Liable for the Debt (Excludes Borrowers Who Were\
Discharged in Bankruptcy and Did Not Reaffirm the\
Debt.)

Exhibit I - Format for Notice of Acceleration to MFH Borrowers\
Discharged in Bankruptcy Who Have Not Reaffirmed the\
Debt.

Exhibit J - Release of a Junior Lien on HUD/Rural Development Joint SFH

Security.

## o0o 

RD Instruction 1955-A

PART 1955 - PROPERTY MANAGEMENT

Subpart A - Liquidation of Loans Secured by Real Estate

and Acquisition of Real and Chattel Property

§ 1955.1 [Purpose]{.underline}.

This subpart delegates authority and prescribes procedures for the
liquidation of loans to individuals and to organizations as identified
in\
§ 1955.3 of this subpart. It pertains to the Multi-Family Housing (MFH)
and Community Facility (CF) programs of the Rural Housing Service (RHS),
and direct programs of the Rural Business-Cooperative Service (RBS).
Guaranteed RBS loans are liquidated upon direction from the Deputy
Administrator, Business Program, RBS. This subpart does not apply to
Farm Service Agency, Farm Loan Programs, and to RHS single family
housing loans, or to CF loans sold without insurance in the private
sector. Theses CF loans will be serviced in the private sector and
future revisions to this subpart no longer apply to such loans. This
subpart does not apply to the Rural Rental Housing, Rural Cooperative
Housing or Farm Labor Housing Programs of RHS. In addition, this subpart
does not apply to Water and Waste Programs of the Rural Utilities
Service, Watershed loans, or Resource Conservation and Development
loans, which are serviced under part 1782 of this title. (Revised
01-09-08, PN 417.)

§ 1955.2 [Policy]{.underline}.

When it has been determined in accordance with applicable loan servicing
regulations that further servicing will not achieve loan objectives and
that voluntary sale of the property by the borrower, except for Multiple
Family Housing (MFH) loans subject to prepayment restrictions, cannot be
accomplished, the loan(s) will be liquidated through voluntary
conveyance of the property to the RBS, RHS, RUS, FSA or by foreclosure
as outlined in this subpart. For MFH loans subject to the prepayment
restrictions, voluntary liquidation may be accomplished only through
voluntary conveyance to RBS, RHS, RUS, and FSA in accordance with
applicable portions of § 1955.10 of this subpart. Nonprogram (NP) loans,
except for Community and Business Programs, will be liquidated as
provided in Subpart J of Part 1951 of this chapter, unless specifically
referenced in this subpart. (Revised 11-12-93,

SPECIAL PN.)

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

DISTRIBUTION: WSAL Account Servicing

Property Management

## 1

## (Revision 11)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.3 [Definitions]{.underline}.

As used in this subpart, the following definitions apply:

[Closing agent]{.underline}. An attorney or title insurance company
which is approved as a loan closing agent in accordance with Subpart B
of Part 1927 of this chapter. (Revised 03-31-92, SPECIAL PN.)

[CONACT or CONACT property]{.underline}. Property acquired or sold
pursuant to the Consolidated Farm and Rural Development Act. Within this
subpart, it shall also be construed to cover property which secured
loans made pursuant to the Agriculture Credit Act of 1978; the Emergency
Agricultural Credit Adjustment Act of 1978; the Emergency Agricultural
Credit Act of 1984; the Food Security Act of 1985; and other statutes
giving agricultural lending authority to the FSA.

[Farmer Program loans]{.underline}. The term \"farmer program loans\"
(FP) refers to the following types of loans: Farm Ownership (FO), Soil
and Water (SW), Recreation (RL), Economic Opportunity (EO), Operating
(OL), Emergency (EM), Economic Emergency (EE), Softwood Timber (ST), and
Rural Housing loans for farm service buildings (RHF). (Added 04-17-91,
SPECIAL PN.)

[Government]{.underline}. The United States of America acting through
RBS, RHS, RUS, and FSA of the U.S. Department of Agriculture.

[Homestead protection]{.underline}. The Farmer Programs
borrower-owner\'s right to lease with an option to purchase the
principal residence located on or off the farm and up to 10 acres of
adjoining land possessed and occupied by the borrower-owner, including a
reasonable number of farm outbuildings located on the adjoining land
that are useful to the occupants of the homestead.

[Interest credit]{.underline}. The terms "interest credit" and "interest
credit assistance," as they relate to Single Family Housing (SFH) loans,
are interchangeable with the term "payment assistance." Payment
assistance is the generic term for the subsidy provided to eligible SFH
borrowers to reduce mortgage payments. (Added 10-27-95, SPECIAL PN.)

## 

## 

## 2

## (Revision 11) 

RD Instruction 1955-A

§1955.3 (Con.)

[Loans to individuals]{.underline}. Farm Ownership (FO), Soil and Water
(SW), Recreation (RL), Special Livestock (SL), Economic Opportunity
(EO), Operating (OL), Emergency (EM), Economic Emergency (EE), Softwood
Timber (ST), and Rural Housing loans from farm service buildings (RHF),
whether to individuals or entities, referred to in this subpart Farm
Credit Programs (FCP) loans; and Land Conservation and Development
(LCD); and SFH, including both Sections 502 and 504 loans. (Revised
10-27-95,\
SPECIAL PN.)

[Loans to Native Americans]{.underline}. FP loans secured by real estate
located within the boundaries of a federally recognized Indian
reservation. The Native American borrower-owner is defined as the party
who pledged real estate as collateral for an FP loan and is the tribe or
a member of the tribe with control over the reservation. (Added
12-30-93, SPECIAL PN.)

[Loans to organizations]{.underline}. Community Facility (CF); Water and
Waste Disposal (WWD); Association Recreation; Watershed (WS); Resource
Conservation and Development (RC&D); insured Business and Industrial
(B&I) both to individuals and groups; Rural Development Loan Fund
(RDLF); Intermediary Relending Program (IRP); Nonprofit National
Corporations (NNC); loans to associations for Irrigation and Drainage
(I&D) and other Soil and Water conservation measures; loans to Indian
Tribes and Tribal Corporations; Shift-in-Land Use (Grazing Association);
Economic Opportunity Cooperative (EOC); Rural Housing Site (RHS); Rural
Cooperative Housing (RCH); Rural Rental Housing (RRH) and Labor Housing
(LH) to both individuals and groups. The housing-type organization loans
identified here are referred to in this subpart collectively as Multiple
Family Housing (MFH) loans.

## 2A

## (Revision 2)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.3 (Con.)

[Market value]{.underline}. The most probable price which property
should bring, as of a specific date in a competitive and open market,
assuming the buyer and seller are prudent and knowledgeable, and the
price is not affected by undue stimulus such as forced sale or loan
interest subsidy.

[Nonrecoverable cost]{.underline}. A contractual or noncontractual
program loan cost expense not chargeable to a borrower, property
account, or part of the loan subsidy. (Revised 08-05-98 PN 294.)

[OGC]{.underline}. The Office of General Counsel, U.S. Department of
Agriculture; refers to the Regional Attorney or Attorney-in-Charge in an
OGC field office unless otherwise indicated.

[Prior lien]{.underline}. A security instrument (such as a mortgage or
deed of trust) or a judgment which was of public record before the Rural
Development security instrument(s) as well as real estate taxes or
assessments which are or will become a lien against the property which
is superior to Rural Development\'s security instrument(s).

[Recoverable cost]{.underline}. A contractual or noncontractual program
loan cost expense chargeable to a borrower, property account, or part of
the loan subsidy. (Revised 08-05-98 PN 294.)

[Servicing official]{.underline}. For loans to individuals as defined in
this section, the servicing official is the County Supervisor. For
insured B&I loans, the servicing official is the State Director. For
RDLF and IRP, the servicing official is the Director, Business and
Industry Division. For NNC, the servicing official is the Director,
Community Facility Division. For all other types of loans, the servicing
official is the District Director.

§ 1955.4 [Redelegation of authority]{.underline}.

Authorities will be redelegated to the extent possible, consistent with
program requirements and available resources.

\(a\) Any authority in this subpart which is specifically provided to
the Administrator or to a Deputy Administrator may only be delegated to
a State Director. The State Director cannot redelegate such authority.
(Revised 08-20-97, PN 280.)

## 3

## (Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.4 (Con.)

\(b\) Except as provided in paragraph (a), the State Director is
authorized to redelegate, in writing, any authority delegated to the
State Director in this subpart to a Program Chief, Program Specialist or
Property Management Specialist on the State Office staff; except the
authority to approve or disapprove foreclosure as outlined in\
§ 1955.15(a)(2) of this subpart may not be redelegated. However, a
duly-designated Acting State Director may approve or disapprove
foreclosure. (Revised 2-15-89, PN 102.)

\(c\) The District Director is authorized to redelegate, in writing, any
authority delegated to the District Director in this subpart to an
Assistant District Director or District Loan Specialist determined by

the District Director to be qualified; except the authority to approve
or disapprove foreclosure as outlined in § 1955.15(a)(1) of this subpart
may not be redelegated. However, a duly designated Acting District
Director may approve or disapprove foreclosure. Authority of District
Directors in this subpart applies to Area loan Specialists in Alaska and
the Director for the Western Pacific Territories.

\(d\) The County Supervisor is authorized to redelegate, in writing, any
authority delegated to the County Supervisor in this subpart to an
Assistant County Supervisor, GS-7, or above, determined by the County
Supervisor to be qualified. Authority of County Supervisors in this
subpart applies to Area loan Specialists in Alaska and Area Supervisors
in the Western Pacific Territories and American Samoa.

\(e\) The monetary limitations on acceptance of voluntary conveyance as
provided in § 1955.10(a) of this subpart may not be redelegated from a
higher-level official to a lower-level official.

§ 1955.5 [General actions]{.underline}.

\(a\) [Assignment of notes to Rural Development]{.underline}. When
liquidation action is approved and the insured note is not held in the
County or District Office, the approval official will request the
Finance Office to purchase the note and forward it to the appropriate
office. Voluntary conveyance may be closed pending receipt of the
note(s), and foreclosure may also be processed pending receipt of the
note(s), unless the original note is required in connection with the
foreclosure action.

\(b\) [Execution of documents]{.underline}.

\(1\) After liquidation of loans to individuals has been approved by the
appropriate official, the County Supervisor is authorized to execute all
necessary forms and documents except notices of acceleration required to
complete transactions covered by this subpart.

## 4

## (Revision 3) 

RD Instruction 1955-A

§ 1955.5(b) (Con.)

\(2\) After liquidation of loans to organizations has been approved by
the appropriate official, the District Director is authorized to execute
all forms and documents for completion of the liquidation except:

\(i\) Notices of acceleration; or

## 4A

## (Added 08-05-98, PN 294)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.5(b)(2) (Con.)

\(ii\) Other forms or documents which specifically requires State or
National Office approval because of monetary limits or policy statement
established elsewhere in this subpart.

\(c\) [Unused loan funds]{.underline}.

\(1\) Funds remaining in a supervised bank account will be handled in
accordance with § 1902.15 of Subpart A of Part 1902 of this chapter
before a voluntary conveyance or foreclosure is processed.

\(2\) Funds remaining in a construction or other account will be applied
to the borrower\'s Rural Development account.

\(d\) [Payment of costs]{.underline}. Costs related to liquidation of a
loan or acquisition of property will be paid according to RD\
Instruction 2024-A as either a recoverable or nonrecoverable cost as
defined in § 1955.3 of this subpart. (Revised 08-13-92, SPECIAL PN.)

\(e\) [Escrow funds]{.underline}. Any funds remaining in the borrower\'s
escrow account at the time of liquidation by voluntary conveyance or
foreclosure are nonrefundable and will be credited to the borrower\'s
loan account. (Added 03-25-91, SPECIAL PN.)

§§ 1955.6 - 1955.8 \[Reserved\]

§ 1955.9 [Requirements for voluntary conveyance of real property located
within a federally recognized Indian reservation owned by a Native
American borrower-owner]{.underline}. (Added 12-30-93, SPECIAL PN.)

\(a\) The borrower-owner is a member of the tribe that has jurisdiction
over the reservation in which the real property is located. An Indian
tribe may also meet the borrower-owner criterion if it is indebted for
Farm Credit Programs loans.

\(b\) A voluntary conveyance will be accepted only after all
preacquisition primary and preservation servicing actions have been
considered in accordance with Subpart S of Part 1951 of this chapter.

\(c\) When all servicing actions have been considered under Subpart S of
Part 1951 of this chapter and a positive outcome cannot be achieved, the
following additional actions are to be taken: (Revised 08-20-97,\
PN 280.)

\(1\) The county official will notify the Native American borrower-owner
and the tribe by certified mail, return receipt requested, and by
regular mail if the certified mail is not received, that:

## 5

## (Revision 6)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.9(c)(1) (Con.)

\(i\) The borrower-owner may convey the real estate security to FSA and
FSA will consider acceptance of the property into inventory in
accordance with paragraph (d) of this section;

\(ii\) The borrower-owner must inform FSA within 60 days from receipt of
this notice of the borrower-owner\'s decision to deed the property to
FSA;

\(iii\) The borrower-owner has the opportunity to consult with the
Indian tribe that has jurisdiction over the reservation in which the
real property is located, or counsel, to determine if State or tribal
law provides rights and protections that are more beneficial than those
provided the borrower-owner under Agency regulations;

\(2\) If the borrower-owner does not voluntarily deed the property to
FSA, not later than 30 days before the foreclosure sale, FSA shall
provide the Native American borrower-owner with the following options:

\(i\) The Native American borrower-owner may require FSA to assign the
loan and security instruments to the Secretary of the Interior. If the
Secretary of the Interior agrees to such an assignment, FSA will be
released from all further responsibility for collection of any amounts
with regard to the loans secured by the real property.

\(ii\) The Native American borrower-owner may require FSA to complete a
transfer and assumption of the loan to the tribe having jurisdiction
over the reservation in which the real property is located if the tribe
agrees to the assumption. If the tribe assumes the loans, the following
actions shall occur:

\(A\) FSA shall not foreclose the loan because of any default that
occurred before the date of the assumption.

\(B\) The assumed loan shall be for the lesser of the outstanding
principal and interest of the loan or the fair market value of the
property as determined by an appraisal.

\(C\) The assumed loan shall be treated as though it is a regular Indian
Land Acquisition Loan made in accordance with Subpart N of Part 1823.

## 

## 

## 6

## (Revision 6) 

RD Instruction 1955-A

§ 1955.9(c) (Con.)

\(3\) If a Native American borrower-owner does not voluntarily convey
the real property to FSA, not less than 30 days before a foreclosure
sale of the property, FSA shall provide written notice to the Indian
tribe that has jurisdiction over the reservation in which the real
property is located of the following:

\(i\) The sale;

\(ii\) The fair market value of the property; and

\(iii\) The ability of the Native American borrower-owner to require the
assignment of the loan and security instruments either to the Secretary
of the Interior or assumption by the tribe (and the consequences of
either action) as provided above.

\(4\) FSA shall accept the offer of voluntary conveyance of the property
unless a hazardous substance, as defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, is
located on the property and will require FSA to take remedial action to
protect human health or the environment if the property is taken into
inventory. In this case, a voluntary conveyance will be accepted only if
FSA determines that it is in the best interests of the Government to
acquire title to the property.

\(d\) When determining whether to accept a voluntary conveyance of an
Native American borrower-owner\'s real property, the county official
must consider:

\(1\) The cost of cleaning or mitigating the effects if a hazardous
substance is found on the property. A deduction equal to the amount of
the cost of hazardous waste clean-up will be made to the fair market
value of the property to determine if it is in the best interest of the
Government to accept title to the property. FSA will accept the property
if clear title can be obtained and if the value of the property after
removal of hazardous substances exceeds the cost of hazardous waste
clean-up.

\(2\) If the property is located within the boundaries of a federally
recognized Indian reservation, and is owned by a member of the tribe
with jurisdiction over the reservation, FSA will credit the Native
American borrower-owner\'s account based on the fair market value of the
property or the FSA debt against the property, whichever is greater.

6A

(Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.10 [Voluntary conveyance of real property by the borrower to the
Government]{.underline}.

Voluntary conveyance is a method of liquidation by which title to
security is transferred to the Government. Rural Development will not
make a demand on a borrower to voluntarily convey. If there is equity in
the property, Rural Development should advise the borrower, in writing,
that there is equity in the property before accepting an offer to
voluntarily convey. If Rural Development receives an offer of voluntary
conveyance, acceptance should only be considered when the government
will likely receive a recovery on its investment. In cases where there
are outstanding liens, a full assessment should be made of the debts
against the property compared to the current market value. Rural
Development should refuse the voluntary conveyance if the Rural
Development lien has neither present nor prospective value or recovery
of the value would be unlikely or uneconomical. Instead, for loans to
individuals, Rural Development should release its lien as valueless in
accordance with § 1965.25(d) of Subpart A of Part 1965 of this chapter
or\
§ 1965.118(c) of Subpart C of Part 1965, as appropriate. For non-FP
borrowers, a voluntary conveyance should only be considered after all
available servicing actions outlined in the respective servicing
regulations have been used or considered and it is determined that the
borrower will not be successful. For FP borrowers, if the borrower has
not received Exhibit A with Attachments 1 and 2 of Subpart S of Part
1951 of this chapter, a voluntary conveyance should be accepted only
after the borrower has been sent Exhibit A with Attachments 1 and 2 of
Subpart S of Part 1951 of this chapter; all available servicing actions
outlined in the respective program servicing regulations have been used
or considered; and it will be in the Government\'s best financial
interest to accept the FP voluntary conveyance. Exhibit G of this
subpart will be used to determine whether or not to accept an FP
voluntary conveyance. In determining if the acceptance of the FP
voluntary conveyance is in the best financial interest of the
Government, the County Supervisor will determine if the borrower has
exhausted all possibilities of restructuring the loan to where a
feasible plan of operation may be developed, the borrower has acted in
good faith in trying to service the debt and Rural Development may
recover its investment in return for the acceptance of the voluntary
conveyance. In addition, prior to acceptance of a voluntary conveyance
of farm real property that collateralizes an FP loan, the County
Supervisor will remind the borrower-owner of possible deed restrictions
and easements that may be placed on the property in the event the
property contains wetlands and floodplains, historic sites and/or other
federally protected environmental resources as set forth in Exhibit M of
Subpart G of Part 1940 of this chapter and § 1955.137 of Subpart C of
this Part. When it is determined that all conditions of § 1951.558(b) of
Subpart L of Part 1951 of this chapter have been met, loans for
unauthorized assistance will be

## 6B

## (Revision 1) 

RD Instruction 1955-A

§ 1955.10 (Con.)

treated as authorized loans and Exhibit A with Attachments 1 and 2 of\
Subpart S of Part 1951 of this chapter will be sent prior to accepting a
voluntary conveyance. Those borrowers who are indebted for nonprogram
(NP) loans who wish to voluntarily convey property will not be sent
Exhibit A with Attachments 1 and 2 of Subpart S of Part 1951 of this
chapter. For Farmer Program borrowers who have received Exhibit A with
Attachments 1 and 2 of Subpart S of Part 1951 of this chapter, a
voluntary conveyance should only be accepted when it is determined to be
in the Government\'s best financial interest. Rejection of an offer of
voluntary conveyance made before or after acceleration from an FP
borrower is appealable. For borrowers having both FP and non-FP loans
secured by a farm tract, a voluntary conveyance should be handled as
outlined above for non-FP loans secured by farm tracts, except that the
applicable servicing option for the FP and non-FP loans should be
considered separately. This separation of servicing options may permit a
borrower to retain the non-farm tract. For newly constructed SFH
properties with major construction defects, see Subpart F of Part 1924
of this chapter. (Revised 12-30-93, SPECIAL PN.)

\(a\) [Authority]{.underline}.

\(1\) [Loans to individuals]{.underline}.

\(i\) [SFH loans]{.underline}. The County Supervisor is authorized to
accept voluntary conveyances regardless of amount of indebtedness.

\(ii\) [FLP Loans]{.underline}. The servicing official is authorized to
accept voluntary conveyance of property secured by Farm Loan Program
loans if the total indebtedness against the property including prior and
junior liens, does not exceed his/her approval authority for the type of
loan (or combination of types) involved in accordance with FSA handbook
1-FLP. The State Executive Director is authorized to approve voluntary
conveyance regardless of amount of indebtedness.\
(Revised- 05-16-01, PN 332.)

## 6C

## (Revision 2)

(10-14-88) SPECIAL PN

§1955.10(a) (Con.) RD Instruction 1955-A

\(2\) [Loans to organizations]{.underline}.

\(i\) The State Director is authorized to approve voluntary conveyance
of property securing Farmer Program and EOC loans regardless of amount
of indebtedness.

\(ii\) The State Director is authorized to approve voluntary conveyance
of property securing MFH loans if the total indebtedness against the
property, including prior and junior liens, does not exceed his/her
approval authority for the type loan involved. Loan approval authorities
are outlined in Exhibits A through E of RD Instruction 1901-A (available
in any Rural Development Office).

\(iii\) Offers to convey property securing loans other than those
outlined in paragraphs (a)(2)(i) and (ii) of this section will be
submitted to the Administrator for approval prior to acceptance of the
conveyance offer. Submissions will include the case file; OGC\'s opinion
on settling any other liens involved; a statement of essential facts;
and recommendations of the State Director and Program Chief. Submissions
are to be addressed to the Administrator, ATTN: (appropriate program
division.)

\(b\) [Forms and documents]{.underline}. All forms and documents in
connection with voluntary conveyance will be prepared and distributed in
accordance with the respective FMI or applicable OGC instructions. For
loans to individuals when the County Supervisor has approval authority,
the facts will be documented in the running record of the borrower\'s
case file. For all other loans, the servicing official will submit the
voluntary conveyance offer, the case file and an narrative report to the
appropriate approval official.

\(c\) [Liens against the property other than Rural Development
liens]{.underline}.

\(1\) [Prior liens]{.underline}.

\(i\) The approval official will determine whether or not prior liens
will be paid. Normally, the Government will pay prior liens in full
prior to acquisition if:

## 7

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§1955.10(c)(l)(i)(Con.)

\(A\) A substantial recovery in the Government\'s investment plus the
amount of the prior lien(s) can be obtained; and

\(B\) The holder of the prior lien(s) objects to the Government
accepting voluntary conveyance subject to the prior lien(s), if consent
of the prior lienholder(s) is required.

\(ii\) If property is acquired subject to prior lien(s), payment of
installments on the lien(s) may be made while title to the property is
held by the Government in accordance with §1955.67 of Subpart B of Part
1955 of this chapter.

\(2\) [Junior liens]{.underline}. The borrower must satisfy junior liens
on the property (except Rural Development liens) and pay real estate
taxes or assessments which are or will become a lien on the property
However, if the borrower is unable or unwilling to do so, settlement of
the liens may be made by Rural Development if settlement would be in the
best interest of the Government, considering all factors such as length
of time required to foreclose, vandalism or other deterioration of the
property which might occur, and effect on management of a MFH project
and its tenants. An Rural Development official will contact junior
lienholders, negotiate the most favorable settlement possible, and
determine whether it is in the Government\'s best interest to settle the
junior liens and accept the voluntary conveyance.

\(i\) For loans to individuals, the approval official is authorized to
settle junior liens in the smallest amount possible, but not to exceed
an aggregate amount of \$1,000 in ea ch SFH case or \$5,000 for other
type loans. For junior liens in greater amounts when the approval
official is the County Supervisor or District Director, prior
authorization must be obtained from the State Director.

\(ii\) For loans to organizations, the State Director will deter mine
whether or not junior liens will be settled and voluntary conveyance
accepted.

\(3\) [Payment of liens]{.underline}. A lien to be settled in accordance
with paragraphs (c)(l)(i) or (c)(2) of this section will be paid as
outlined in §1955.5(d) of this subpart and charged to the borrower\'s
account as a recoverable cost

\(d\) [Offer of voluntary conveyance]{.underline}. An offer of voluntary
conveyance will consist of the following:

## 8 

RD Instruction 1955-A

§ 1955.10(d) (Con.)

\(1\) Form RD 1955-1, \"Offer to Convey Security.\"

\(2\) Warranty Deed, or other deed approved by OGC to comply with State
laws. The deed will not be recorded until it is determined the voluntary
conveyance will be accepted. At the time of the offer, the borrowers
will be informed that the conveyance will not be accepted until the
property has been appraised and a lien search has been obtained. If the
voluntary conveyance is not accepted, the deed and Form RD 1955-1,
properly executed, will be returned to the borrower along with a
memorandum stating the reason(s) for non-acceptance.

\(3\) A current financial statement containing information similar to
that required to complete Forms RD 410-1, \"Application for RD
Services\" or RD 442-3, \"Balance Sheet,\" and information on present
income and potential earning ability. Exception for SFH loans: RD
requires a budget and/or financial statement and, if necessary to
discover suspected undisclosed assets, a search of public records, only
when the value of the security property may be less than the debt.
(Revised 02-13-92, SPECIAL PN.)

\(4\) For organization borrowers, a duly-adopted Resolution by the
governing body authorizing the conveyance and certified by the attesting
official with the corporate seal affixed. The Resolution will indicate
which officials are authorized to execute the offer to convey and the
deed on behalf of the borrower. If shareholder approval is necessary,
the Resolution will specifically recite that shareholder approval has
been obtained.

\(5\) If water rights, mineral rights, development rights, or other use
rights are not fully covered in the deed, the advice of OGC will be
obtained and appropriate documents to transfer rights to the Government
will be obtained before the voluntary conveyance is accepted. The
documents will be recorded, if necessary, in connection with closing the
conveyance.

\(6\) If property is under lease, an assignment of the lease to the
Government will be obtained with the effective date being the date the
voluntary conveyance is closed. If an oral lease is in force, it will be
reduced to writing and assigned to the Government.

\(7\) The borrower may be required to provide a title insurance policy
or final title opinion from a designated attorney when

## 9

## (Revision 6)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.10(d)(7) (Con.)

the State Director determines it is necessary to protect the
Government\'s interest. Such title insurance policy or final title
opinion will show title vested to the Government subject only to
exceptions and liens approved by the County Supervisor.

\(8\) Farmer program loan borrowers who voluntarily convey after
receiving the appropriate loan servicing notice(s) contained in the
attachments of Exhibit A of Subpart S of Part 1951 of this chapter must
properly complete the acknowledgement form sent with the notice.

\(9\) For MFH loans, assignment of Housing Assistance Payment (HAP)
Contracts will be obtained. Rental Assistance will be retained until the
State Director is advised by OGC that RD has title to the property.
After a voluntary conveyance, the Agency may transfer Rental Assistance
in accordance with 7 CFR 3560, subpart F. (Revised 02-24-05, SPECIAL
PN.)

\(e\) [Appraisal of property]{.underline}. After an offer of voluntary
conveyance, but before acceptance by RD, an appraisal of the property
will be made to establish the current market value of the property. If a
qualified RD appraiser is not available to appraise property securing a
loan other than MFH, the State Director may obtain an appraisal from a
qualified appraiser outside RD in accordance with RD Instruction 2024-A
(available in any RD office). For property securing MFH, prior
authorization must be obtained by the Assistant Administrator, Housing,
to secure an appraisal from a source outside Rural Development. For
property securing FP loans, the contract appraiser must complete the
appraisal in accordance with FSA Handbook 1-FLP for Farmer Program
property, or\
HB-1-3550, for Single Family Housing property. Also, the appraiser must
meet at least one of the following qualifications: (Revised\
09-27-06, PN 402.)

\(1\) Certification by a National or State Appraisal Society.

\(2\) If a certified appraiser is not available, the appraiser may be
one who meets the criteria certification in a National or State
Appraisal Society.

\(3\) The appraiser has recent, relevant appraisal experience or
training, or other factors clearly establishing the appraiser\'s
qualifications.

\(f\) [Processing offer to convey security and acceptance by
RD]{.underline}. If a borrower has both SFH and other type loans, the
portion of this paragraph dealing with the loan(s) other than SFH will
be followed.

## 10

## (Revision 6) 

RD Instruction 1955-A

§ 1955.10(f) (Con.)

\(1\) *SFH loans*. Rural Development does not solicit or encourage
conveyance of SFH security property to the Government and will consider
a borrower\'s offer to convey by deed in lieu of foreclosure only after
the debt is accelerated and when it is in the Government\'s interest.
Upon receipt of an offer to convey, the servicing official will remind
the borrower of provisions for voluntary liquidation under 7 CFR part
3550 and the consequences of a conveyance by deed in lieu of foreclosure
as follows: All costs related to the conveyance which Rural Development
pays will be added to the debt; a credit equal to the market value of
the property, as determined by Rural Development, less prior liens, will
be applied to the debt; and if the credit does not satisfy the debt, the
borrower will not automatically be released of liability. The
unsatisfied debt, after acceleration under § 1955.10(h)(5) of this
subpart, may be settled according to Subpart B of Part 1956 of this
chapter; however, a deficiency judgment will not be pursued when the
borrower was granted a moratorium if the borrower faithfully tried to
meet loan obligations. The conveyance is processed as follows: (Revised
01-23-03, SPECIAL PN.)

\(i\) Before accepting the offer, the County Supervisor will transmit
the deed to a closing agent requesting a title search covering the
period of time since the latest title opinion in the case file. The same
agent who closed the loan should be used, if possible; otherwise one
will be selected from the

## 10A

## (Revision 2)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.10(f)(1)(i) (Con.)

approved list of closing agents, taking care that cases are distributed
fairly among approved agents. The closing agent may be instructed that
the County Supervisor considers the voluntary conveyance offer
conditionally approved, and the closing agent may record the deed after
the title search if there are no liens against the property other than:

\(A\) The Consolidated Farm Service Agency (CFSA) lien(s);

\(B\) Prior liens when CFSA has advised the closing agent that title
will be taken subject to the prior lien(s) or has told the closing agent
that the prior lien(s) will be handled in accordance with §
1955.10(c)(1) of this subpart; and/or

\(C\) Real estate taxes and/or assessments which must be paid when title
to the property is transferred.

\(ii\) If junior liens are discovered, the closing agent will be
requested to provide CFSA with the lienholder\'s name, amount of lien,
date recorded, and the recording information (recording office, book and
page), return the unrecorded deed to CFSA, and await further instruction
from CSFA. In such cases, the County Supervisor will proceed in
accordance with § 1955.10(c)(2) of this subpart. If agreement has been
reached with the lienholder(s) for settling the junior lien(s) in order
to accept the conveyance, the deed will be returned to the closing agent
for a title update and recording.

\(iii\) The closing agent will be requested to provide a certification
of title to CSFA after recordation of the deed. A certification of title
is a statement that fee title is vested in the Government subject only
to the CSFA lien(s) and prior liens previously approved by CSFA. After
receipt of the certification of title, the County Supervisor will notify
the borrower that the conveyance has been accepted in accordance with §
1955.10(g) of this subpart.

\(2\) [Consolidated Farm and Rural Development Act (CONACT) loans to
individuals]{.underline}. If the Agency indebtedness plus any prior
liens exceeds the market value of the property, the indebtedness cannot
be satisfied but a credit can be given equal to the market value less
prior liens. Debt settlement will be considered in accordance with
subpart B of part 1956 of this chapter. (Revised 09-10-03, PN 363.)

## 11

## (Revision 4)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.10(f)(2) (Con.)

\(i\) [Crediting accounts]{.underline}. The Agency will credit an
account by an amount equal to the market value less prior liens, unless
the borrower is Native American. Native American borrower-owners will be
credited with the fair market value or the Agency debt against the
property, whichever is greater, provided: (Revised 09-10-03, PN 363.)

\(A\) The borrower-owner is a member of a tribe or the tribe, and

\(B\) The property is located within the confines of a federally
recognized Indian reservation.

\(ii\) [Agency approval]{.underline}. The same procedure outlined in
paragraphs (f)(1)(i) through (f)(1)(iii) of this section will be
followed for approving the voluntary conveyance. The conveyance will be
accepted in full satisfaction of the indebtedness unless the market
value of the property to be conveyed is less than the total of
Government indebtedness and prior liens, and the borrower has agreed to
accept a credit in the amount of the market value of the security
property less prior liens, if any.(Revised 09-10-03, PN 363.)

\(A\) In accordance with § 1955.10(a)(1)(ii) of this subpart the offer
to convey will be completed by or forwarded to the appropriate approval
official. The case file will contain the following information:

\(1\) Form RD 1955-2, "Report on Real Estate Problem Case";

\(2\) Report of title search;

\(3\) Borrower\'s offer of voluntary conveyance (consisting of
applicable items outlined in paragraphs (d)(l) through (d)(8) of this
section);

\(4\) Current appraisal of property; and

\(5\) Unpaid balance on Farm Service Agency indebtedness and other
liens, both prior and junior, if any.

## 12

## (Revision 4) 

RD Instruction 1955-A

§ 1955.10(f)(2)(ii) (Con.)

\(B\) If the approval official determines the conveyance should be
accepted, the file will be returned to the servicing official with a
memorandum of conditional approval. The same conditions for release of
liability apply as in subpart B of 1956 of this chapter. If the approval
official does not concur in acceptance of the conveyance, the file will
be returned with a memorandum stating the reasons for rejecting the
offer and giving instructions to the servicing official for further
servicing of the account. (Revised 09-10-03, PN 363.)

\(C\) After the conveyance has conditionally been approved, the
servicing official will forward the deed to a closing agent with
instructions to record it provided no liens have been recorded since the
recent title search. The closing agent will be requested to provide a
certification of title to the Farm Service Agency after recordation of
the deed. After receipt of the certification of title, the borrower will
be notified that the conveyance has been accepted in accordance with
paragraph (h) of this section. (Revised 09-10-03,\
PN 363.)

\(3\) [Loans to organizations]{.underline}. When an offer of voluntary
conveyance is received from an organization borrower, and the market
value of the property being conveyed (less prior liens, if any) is less
than the Government debt, full consideration must be given to the
borrower\'s present situation and future prospects for paying all or a
part of the debt. (Revised 09-10-03, PN 363.)

\(i\) [Items to be included in the borrower\'s case file for MFH
loans]{.underline}:

\(A\) Report on Multiple-Family Housing Problem Case, (Exhibit A to this
subpart available in any Rural Development Office);

\(B\) Liquidation and management plan with specific recommendations of
the District Director;

\(C\) Form RD 1955-1;

\(D\) Resolution authorizing the conveyance, if applicable;

## 13

## (Revision 4)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.10(f)(3)(i) (Con.)

\(E\) Report of title search from an approved closing agent covering the
period of time since the latest title opinion is in the case file;

\(F\) Form RD 3560-7, \"Multi-Family Housing Project Budget Utility
Allowance,\" (operating budget for first year and typical year);
(Revised 02-24-05, SPECIAL PN.)

\(G\) Form RD 3560-10, \"Multi-Family Housing Borrower Balance Sheet";
(Revised 02-24-05, SPECIAL PN.)

\(H\) Current appraisal prepared by a MFH designated appraiser;

\(I\) Balance on Rural Development account(s) and other liens, if any;

\(J\) Assignment of Housing Assistant Payment (HAP) contracts, if
applicable, along with evidence of contract with HUD;

\(K\) Current statement of account from the Finance Office;

\(L\) Development plan with breakdown of costs, if applicable; and

\(M\) Form RD 440-2, executed in accordance with the FMI, when
applicable. (Revised 12-30-93, SPECIAL PN.)

\(ii\) Items to be included in the borrower\'s case file for loans other
than MFH:

\(A\) Report on Servicing Action (Exhibit A to Subpart E of Part 1951 of
this Chapter, available in any Rural Development office);

\(B\) Liquidation and management plan;

\(C\) Form RD 1955-1;

## 14

## (Revision 4)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.10(f)(3)(ii) (Con.)

\(D\) Organization\'s Resolution authorizing the conveyance;

\(E\) Report of title search from an approved closing agent covering the
period of time since the latest title opinion in the case file;

\(F\) Form RD 442-3; (Revised 12-30-93, SPECIAL PN.)

\(G\) Current appraisal;

\(H\) Statement showing income and expenses due but unpaid;

\(I\) Balance on Rural Development account(s) and other liens, if any;
and

\(J\) Form RD 440-2, executed in accordance with the FMI concerning
release from liability if property value is less than the Rural
Development indebtedness plus prior liens, if any.

\(g\) [Closing of conveyance]{.underline}.

\(1\) The conveyance to the Government will be considered closed when
the recorded deed has been returned to Rural Development, a
certification of title is received from the closing agent that title is
vested in the Government with no outstanding encumbrances other than the
Rural Development lien(s) or previously approved prior liens, and the
borrower is notified of the acceptance of the conveyance. For loans to
organizations, OGC will be requested to review the case to verify that
it was closed properly. The property will be assigned an ID number and
entered into the Acquired Property Tracking System through the Automated
Discrepancy Processing System (ADPS) terminal in the County Office.
(Revised 12-30-93,\
SPECIAL PN.)

\(2\) When costs incident to the completion of the transaction are to be
paid by the Government, the servicing official will prepare and process
the necessary documents as outlined in § 1955.5(d) of this subpart and
the costs will be charged to the borrower\'s account as recoverable
costs. This includes taxes and assessments, water charges which protect
the right to received water, other liens, closing agent\'s fee, and any
other costs related to the conveyance.

## 14A

## (Added 12-03-03, PN 367.)

## (10-14-88) SPECIAL PN 

RD Instruction 1955-A

§ 1955.10 (Con.)

\(h\) [Actions to be taken after closing conveyance]{.underline}.

\(1\) When the Rural Development account is satisfied, the note(s) will
be stamped \"Satisfied by Surrender of Security and Borrower Released
from Liability,\" and the statement must be signed by the servicing
official.

\(2\) When the Rural Development account is not satisfied and the
borrower is not released from liability, the note(s) will be retained by
Rural Development.

\(3\) The servicing official will release the lien(s) of record,
indicating that the debt was satisfied by surrender of security or that
the lien is released but the debt not satisfied, whichever is
applicable. If the lien is to be released but the debt not satisfied,
OGC will provide the type of instrument required to comply with
applicable State laws.

\(4\) After release of the lien(s), the servicing official will return
the following to the borrower:

\(i\) If borrower is released from liability, the satisfied note(s) and
a copy of Form RD 1955-1 showing acceptance by the Government; or

\(ii\) If borrower is not released from liability, a copy of Form RD
1955-1 showing acceptance by the Government.

\(5\) When the Rural Development account is not satisfied and the
borrower not released from liability, the account balance, after
deducting the \"as-is\" market value and prior liens, if any, will be
accelerated utilizing Exhibit F of this subpart (available in any Rural
Development office).

\(6\) For MFH loans, the State Director will cancel any interest credit
and suspend any rental assistance. These actions will be accomplished by
notifying the Finance Office unit which handles MFH accounts. In the
interim, the tenants will continue rental payments in accordance with
their lease. Tenants will be informed of the pending liquidation action
and the possible consequences of the action. If the project is to be
removed from the Rural Development

## 15

## (Revision 3)

## (10-14-88) SPECIAL PN 

RD Instruction 1955-A

§ 1955.10(h)(6) (Con.)

program, a minimum of 180 days\' notice to the tenants is required.
Letters of Priority Entitlement must be made available to any tenants
that will be displaced. (Revised 02-24-05, SPECIAL PN.)

\(7\) Actions outlined in § 1955.18 of this subpart will be taken, as
applicable

§ 1955.11 [Conveyance of property to Rural Development by trustee in
bankruptcy]{.underline}.

\(a\) [Authority]{.underline}. With the advice of OGC (and prior
approval of the National Office for MFH, Community Programs, and insured
B&I loans), the State Director within his/her authority is authorized to
accept a conveyance of property to the Government by the Trustee in
Bankruptcy, provided:

\(1\) The Bankruptcy Court has approved the conveyance;

\(2\) The conveyance will permit a substantial recovery on the Rural
Development debt; and

\(3\) Rural Development will acquire title free of all liens and
encumbrances except Rural Development liens.

\(b\) [Fees and deed]{.underline}.

\(1\) Rural Development may pay any necessary and proper fees approved
by the bankruptcy court in connection with the conveyance. Before paying
a fee to a trustee for a Trustee\'s Deed in excess of \$300 for any loan
type(s) other than Farmer programs or \$1,000 for Farmer Programs loans,
prior approval of the Administrator must be obtained. The State Director
will process the necessary documents as outlined in § 1955.5(d) of this
subpart for payment of fees as recoverable costs.

\(2\) Conveyance may be by Trustee\'s Deed instead of a warranty deed If
upon advice of OGC it is determined a deed from any other person or
entity (including the borrower) is necessary to obtain clear title, a
deed from such person or entity will be obtained.

## 16

## (Revision 3) 

RD Instruction 1955-A

§ 1955.11 (Con.)

\(c\) [Acceptance]{.underline}. The conveyance will be accepted for an
amount of credit to the borrower\'s Rural Development account(s) as set
forth in\
§ 1955.18(e)(4) of this subpart.

\(d\) [Reporting]{.underline}. Acquisition of property under this
section will be reported in accordance with § 1955.18(a) of this
subpart.

§ 1955.12 [Acquisition of property which served as security for a loan
guaranteed by Rural Development or at sale by another lienholder,
bankruptcy trustee, or taxing authority]{.underline}.

When the servicing regulations for the type of loan(s) involved permit
Rural Development to acquire property by one of these methods, the
acquisition will be reported in accordance with § 1955.18(a) of this
subpart.

§ 1955.13 [Acquisition of property by exercise of Government redemption
rights]{.underline}.

When the Government did not protect its interest in security property in
a foreclosure by another lienholder, and if the Government has
redemption rights, the State Director will determine whether to redeem
the property. This determination will be based on all pertinent factors
including the value of the property after the sale, and costs which may
be incurred in acquiring and reselling the property. For Farmer Program
loans, the County Supervisor will document the determination on Exhibit
G of this subpart. The decision must be made far enough in advance of
expiration of the redemption period to permit exercise of the
Government\'s rights. If the property is to be redeemed, complete
information documenting the basis for not acquiring the property at the
sale and factors which justify redemption of the property will be
included in the case file. The assistance of OGC will be obtained in
effecting the redemption. If the State Director decides not to redeem
the property, the Government\'s right of redemption under Federal law
(28 USC §2410) may be waived without consideration. If a State law right
of redemption exists and may be sold, it will not be disposed of for
less than its value.

§ 1955.14 [Release of a junior lien on HUD/Rural Development joint
security]{.underline}. (Added 11-24-93, PN 215.)

Exhibit J of this subpart provides administrative instructions to obtain
or grant a release of a junior lien held by one agency when the other
forecloses a prior lien or accepts a deed in lieu of foreclosure on SFH
security property.

## 17

## (Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.15 [Foreclosure by the Government of loans secured by real
estate]{.underline}.

Foreclosure will be initiated when all reasonable efforts have failed to
have the borrower voluntarily liquidate the loan through sale of the
property, voluntary conveyance, or by entering into an accelerated
repayment agreement when applicable servicing regulations permit; when
either a net recovery can be made or when failure to foreclose would
adversely affect Rural Development programs in the area. Also, in Farmer
Program cases, (except graduation cases under Subpart F of Part 1951 of
this Chapter), the borrower must have received Exhibit A with
Attachments 1 and 2 of Subpart S of Part 1951 of this chapter, and any
appeal must have been concluded. For real property located within the
confines of a federally recognized Indian reservation and owned by a
Native American borrower, proper notice of voluntary conveyance must be
given as outlined in § 1955.9(c)(1) of this subpart. (Revised 12-30-93,
SPECIAL PN.)

\(a\) [Authority]{.underline}.

\(1\) [Loans to individuals]{.underline}. The District Director is
authorized to approve or disapprove foreclosure and accelerate the
account.

## 18

## (Revision 3) 

RD Instruction 1955-A

§ 1955.15(a) (Con.)

\(2\) [Loans to organizations]{.underline}.

\(i\) The State Director or District Director is authorized to approve
or disapprove foreclosure of MFH loans when the amount of the Rural
Development secured debt does not exceed their respective loan approval
authority. The State Director is authorized to approve or disapprove
foreclosure of I&D, Shift-In-Land-Use (Grazing Association), loans to
Indian Tribes and Tribal Corporations, and EOC loans, regardless of the
amount of debt.

\(ii\) For all other organization loans, foreclosure will not be
initiated without prior approval of the Administrator. The State
Director will obtain OGC\'s opinion on the steps necessary to foreclose
the loan, and forward the appropriate problem case report, a statement
of essential facts, his/her recommendation, a copy of the OGC opinion,
and the borrower\'s case file to the Administrator, Attn: Assistant
Administrator (appropriate loan division) with a request for
authorization to initiate foreclosure.

\(b\) [Problem case report]{.underline}. When foreclosure is
recommended, the servicing official will prepare Form RD 1955-2 for
Farmer Program or SFH loans, Exhibit A to this subpart for MFH loans, or
Exhibit A of RD Instruction 1951-E for other organization loans. IF
chattel security is also involved, Forms RD 455-1, \"Request for Legal
Action;\" 455-2, \"Evidence of Conversion;\" and 455-22, \"Information
for Litigation;\" as applicable to the case, will be prepared in
accordance with the respective FMIs and made a part of the problem case
submission. A statement must be included by the servicing official in
the narrative that all servicing actions required by Rural Development
loan servicing regulations have been taken and all required notices
given to the borrower.

\(1\) [Appraisal]{.underline}. The market value of the property may be
estimated in completing the problem case report unless there are one of
more prior liens other than current-year real estate taxes. Where such
prior liens are involved, an appraisal report reflecting market value in
existing condition will be included in the case file as a basis for
determining the Government\'s prospects for financial recovery through
foreclosure.

\(2\) [Recommendation for deficiency judgment]{.underline}. If the debt
will not be satisfied by the foreclosure, the borrower\'s financial
situation will be assessed to determine if there is a possibility of
further recovery on the account through a deficiency judgment. A summary
of these determinations will be fully documented and appropriate

## 

## 19

## (Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.15(b)(2) (Con.)

recommendations made concerning deficiency judgment in the applicable
problem case report. (Revised 01-23-03, SPECIAL PN.)

\(3\) [Historic preservation]{.underline}. If it is likely that Rural
Development will acquire title to the property as a result of the
foreclosure, and the structure(s) on the property will be in excess of
50 years old at the time of acquisition or meet any of the other
criteria contained in § 1955.137(c) of Subpart C of Part 1955 of this
chapter, steps should be initiated to meet the requirements of the
National Historic Preservation Act as outlined in § 1955.137 (c). Formal
steps should not be initiated until the conclusion of all appeals,
however, any such documentation required may be completed when the
problem case report is prepared. This action should eliminate delays in
selling the property after acquisition. (Revised 08-20-97, PN 280.)

\(c\) [Submission of problem case]{.underline}. The servicing official
will submit the completed problem case docket to the official authorized
to approve the foreclosure (approval official). Before approval of
foreclosure and acceleration of the account, the approval official is
responsible for review of the problem case report to see that all items
are complete and that all required servicing actions have been taken and
all required notices given the borrower. The narrative portion of the
report should provide complete information on the borrower\'s financial
condition, deficiency judgment in case the debt is not satisfied by the
foreclosure, and other pertinent background items. The approval official
will approve or disapprove the foreclosure, or make a recommendation and
refer the case to the National Office, if not within his/her approval
authority. If foreclosure is not approved, the case will be returned to
the originating office with instructions for further servicing. Problem
case submission is as follows:

\(1\) [For loans to individuals]{.underline}. The County Supervisor will
submit the case to the District Director.

## 20

## (Revision 3) 

RD Instruction 1955-A

§ 1955.15(c) (Con.)

\(2\) [For loans to organizations]{.underline}. The District Director
will submit the case to the State Director along with a proposed
liquidation and management plan covering the time the foreclosure is in
process. The State Director will obtain the advice of OGC if required in
connection with the type of loan being liquidated.

\(d\) [Approval of foreclosure]{.underline}. When foreclosure is
approved, it will be handled as follows:

## 20A

## (Added 08-20-97, PN 280)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.15(d) (Con.)

\(1\) [Prior lien(s)]{.underline}. If there is a prior lien, all
foreclosure alternatives should be explored including whether RBCDS,
RHCDS, RUS, and CFSA will give the prior lienholder the opportunity to
foreclose; join in the action if the prior lienholder wishes to
foreclose; or foreclose RBCDS, RHCDS, RUS, and CFSA loan(s), either
settling the prior lien or foreclosing subject to it. The provisions of
§1965.11(c) of subpart A of part 1965 of this chapter must be followed
for loans serviced under Subpart A of Part 1965. The assistance of OGC
should be obtained in weighing the alternatives, with the objective
being to pursue the course which will result in the greatest net
recovery by the Government. After it is decided which option will be
most advantageous to the Government, the approval official, either
directly or through a designee, will contact the prior lienholder to
outline RBCDS, RHCDS, RUS, and CFSA position. If State laws affect this
action, a State Supplement will be issued with the advice of OGC to
establish the procedure to be followed. For real property located within
the confines of a federally recognized Indian reservation owned by a
Native American borrower-owner, an analysis of whether RBCDS, RHCDS,
RUS, and CFSA should acquire title must include facts which demonstrate
the fair market value after considering the cost of clean-up of
hazardous substances on the property.\
(Revised 12-30-93, SPECIAL PN.)

\(2\) [Acceleration of account]{.underline}. Subject to paragraphs
(d)(2)(i), (d)(2)(ii), and (d)(2)(iii) of this section, the account will
be accelerated using a notice substantially similar to Exhibits B, C, D,
or E-1 of this subpart, or for multi-family housing, RD Guide Letters
1955-A-1 or 1955-A-2, as appropriate, to be signed by the official who
approved the foreclosure. The accounts of borrowers with pending Chapter
12 and 13 cases which have not been discharged will be accelerated only
in accordance with instructions from OGC. Upon OGC approval, the
accounts of these borrowers may be accelerated using a notice
substantially similar to Exhibit D of this subpart. Loans secured by
chattels must be accelerated at the same time as loans secured by real
estate in accordance with §1965.26(c) of subpart A of part 1965 of this
chapter. The notice will be sent by certified mail, return receipt
requested, to each obligor individually, addressed to the last known
address. If different from the property address and/or the address the
Finance Office uses, a copy of the notice will also be mailed to the
property address and the address currently used by the Finance Office.
(In chattel liquidation cases which have been referred for civil action
under Subpart A of Part 1962 of this chapter, the Finance Office will be
sent a copy of Exhibit D, E, or E-1 as applicable. County office and
Finance Office loan records will be

21

(Revision 7)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.15(d)(2) (Con.)

adjusted to mature the entire debt in such cases.) If a signed receipt
for at least one of these acceleration notices sent by certified mail is
received, no further notice is required. If no receipt is received, a
copy of the acceleration notice will be sent by regular mail to each
address to which the certified notices were sent. This type mailing will
be documented in the file. A State Supplement may be issued if OGC
advises different or additional language or format is required to comply
with State laws or if notice and mailing instructions are different from
that outlined in this paragraph. A conformed copy of the acceleration
notice will be forwarded to the servicing official, and
[except]{.underline} for FP cases, to the hearing officer identified in
the notice according to Subpart B of Part 1900 of this chapter. Farm
Credit Programs appeals will be concluded before acceleration. For MFH
loans, a copy of the acceleration letter will also be forwarded to the
National Office, ATTN: MFH Servicing and Property Management Division,
for monitoring purposes. Accounts may be accelerated as follows:
(Revised 08-20-93, SPECIAL PN.)

\(i\) Where monetary default is involved, the account may be accelerated
immediately after approval of foreclosure.

\(ii\) Where monetary default is [not]{.underline} involved, the account
will not be accelerated until the concurrence of OGC is obtained.

\(iii\) If borrower obtained the loan while a civilian, entered military
service after the loan was closed, and the Agencies have not obtained a
waiver of rights under the Soldiers and Sailors Relief Act, the account
will not be accelerated until OGC has reviewed the case and given
instructions.

\(iv\) If the decision is made to liquidate the farm loan(s) of a
borrower who also has a SFH loan(s), and the dwelling was used as
security for the farm loan(s) it will not be necessary to meet the
requirements of 7 CFR part 3550 prior to accelerating the account.
Except that, if the borrower is in default on his/her farm loan(s), the
SFH account must have been considered for interest credit and/or
moratorium at the time servicing options are being considered for the FP
loan(s) prior to acceleration. If it is later determined the FP loan(s)
are to receive additional servicing in lieu of liquidation, the RH loan
will be reinstated simultaneously with the FP servicing actions and may
be reamortized in accordance with 7 CFR part 3550. Accounts of a
borrower who has both FP and SFH loan(s) may be accelerated as follows:
(Revised 01-23-03, SPECIAL PN.)

22

(Revision 7)

RD Instruction 1955-A

§ 955.15(d)(2)(iv) (Con.)

\(A\) When the borrower\'s dwelling financed with an SFH loan(s) is
secured by and located on the same farm real estate as the Farmer
Program loan(s) ([dwelling located on the farm]{.underline}), the SFH
loans(s) will be serviced in accordance with § 1965.26 (c)(1) of Subpart
A of Part 1965 of this chapter. (Revised 04-17-91, SPECIAL PN.)

\(B\) When the borrower\'s dwelling is financed with a SFH loan(s) and
is located on a non-farm tract which also serves as additional security
for the Farmer Program loan(s), the loans will be serviced in accordance
with § 1965.26 (c)(2) of Subpart A of Part 1965 of this chapter.
(Revised 04-17-91, SPECIAL PN.)

\(C\) When the borrower\'s dwelling is financed with a SFH loan(s) and
is on a non-farm tract which does not serve as additional security for
the Farmer Program loan(s), it will NOT be accelerated simultaneously
with sending out Attachments 5 and 6, or 5-A and 6-A, or Attachment 9
and 10, or 9-A and 10-A, of Exhibit A of subpart S of part 1951 of this
chapter, as applicable, unless it is subject to liquidation based on
provisions of 7 CFR part 3550, taking into consideration the prospects
for success that may evolve when the borrower\'s livelihood is from a
source other than the farming operation. If the SFH loan is in default
and subject to liquidation based on provisions of 7 CFR part 3550, the
SFH loan(s) must be accelerated at the same time the borrower is sent
Attachment 5 and 6, or 5-A and 6-A, or Attachments 9 and 10, or 9-A and
10-A, to Exhibit A of subpart S of part 1951 of this chapter, as
applicable. For those borrowers who are in non-monetary default on their
Farmer Programs loans and fail to return Attachment 4 of Exhibit A, the
Farmer Programs loans and SFH loans will be accelerated at the same
time. If the borrower appeals, one appeal hearing and one review will be
held for both adverse actions. (Revised 01-23-03, SPECIAL PN.)

\(D\) If a borrower\'s FP loan(s) were accelerated prior to May 7, 1987,
and the SFH loan(s) is not accelerated, the SFH loan will be accelerated
at the same time the borrower is sent Attachments 5 and 6, or

## 22A

## (Revision 4)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.15(d)(2)(iv)(D) (Con.)

Attachments 7 and 8 to Exhibit A of Subpart S of 1951 of this chapter,
as applicable, unless the requirements of\
§ 1965.26 of Subpart A of part 1965 of this chapter are met or the
liquidation of the SFH loan is based on provisions of 7 CFR Part 3550.
If the borrower is sent Attachments 5 and 6, or 5-A and 6-A, as
applicable, and requests an appeal, one hearing and one review will be
held for both the adverse action on the FP loan restructuring request
and SFH acceleration notices. If the borrower is sent Attachments 7 and
8, there are no further appeals on the FP loans; but, the borrower is
entitled to a hearing and a review on the SFH acceleration notice.
(Revised 01-23-03, SPECIAL PN.)

\(v\) For MFH loans, the acceleration notice will advise the borrower of
all applicable prepayment requirements, in accordance with 7 CFR part
3560, subpart N. The requirements include the application of
restrictive-use provisions to loans made on or after December 21, 1979,
prepaid in response to acceleration notices and all tenant and agency
notifications. Any Rural Development loan made before December 21, 1979,
prepaid in response to the issuance of an acceleration notice, will also
be required to have the appropriate restrictive-use language inserted on
the instrument recorded in the real estate records, as appropriate upon
the advice of OGC, [only]{.underline} if the payment occurs within 1
year after the borrower had submitted a request to prepay the loan(s).
The acceleration notice will also remind borrowers that rent levels
cannot be raised during the acceleration without Rural Development
approval, even after subsidies are cancelled or suspended. Tenants are
to be notified of the status of the project and of possible consequences
of these actions. If the borrower wishes to prepay the project in
response to the acceleration and Rural Development makes a determination
that the housing is no longer needed, a minimum of 180 days\' notice to
tenants is required before the project can be removed from the Rural
Development program. Letters of Priority Entitlement must be made
available. (Revised 02-24-05, SPECIAL PN.)

## 22B

## (Revision 2) 

§1955.15 (d) (Con.) RD Instruction 1955-A

\(3\) [Offers by borrowers after acceleration of account]{.underline}.

\(i\) [Farmer Programs (FP) accelerations]{.underline}. This category
also includes non-FP loans to the same borrower which have been
accelerated as part of the same action. After the account is
accelerated, the borrower will have 30 days from the date of the
acceleration notice to make payment in full to stop the acceleration,
unless State or tribal law requires that the foreclosure be withdrawn if
the account is brought current and a State supplement is issued to
specify this requirement. (Revised 12-30-93, SPECIAL PN.)

\(A\) Payment in full \[see Exhibit D of this subpart (available in any
Rural Development office)\] may consist of the following means of fully
satisfying the debt.

([1]{.underline}) Cash.

([2]{.underline}) Transfer and assumption.

([3]{.underline}) Sale of property.

([4]{.underline}) Voluntary conveyance.

\(B\) Payments which do not bring the account current can be accepted
subject to the following requirements:

([1]{.underline}) Payments will be accepted if there is no remaining
security for the debt (real estate and chattel).

([2]{.underline}) If the borrower is in the process of selling security
or nonsecurity, payments may be accepted unless State law would require
the acceleration to be reversed. In States where payments cannot be
accepted unless the acceleration is reversed, the payments will not be
accepted. A State supplement will be issued to address State law on
accepting payments after acceleration.

([3]{.underline}) If payments are mistakenly credited to the borrower\'s
account, no waiver or prejudice to any rights which the United States
may have for breach of any promissory note or covenant in the real
estate instruments will result. Disposition of such payments will be
made after consulting OGC.

## 23

## (Revision 1)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§1955.15 (d)(3)(i)(B) (Con.)

([4]{.underline}) The servicing official will notify the approval
official on any other offer. This includes a request by the borrower for
an extension of time to accomplish voluntary liquidation or a proposal
to cure the default(s). In all other cases, the approval official will
decide whether an offer from a borrower will be accepted and servicing
of the loan reinstated or whether foreclosure will be delayed to give
the borrower additional time to voluntarily liquidate as authorized in
servicing regulations for the type loan(s) involved. If an offer is
received after the case has been referred to OGC, the approval official
will consult OGC before accepting or rejecting the offer. The denial of
an offer to stop foreclosure is not appealable. In all cases, the
approval official will notify the servicing official of the decision
made.

\(ii\) [All other accelerations]{.underline}. After the account is
accelerated, loan servicing ceases. For example, for SFH loans, the
renewal or granting of interest credit or moratorium is not authorized.
The servicing official will accept no payment for less than the unpaid
loan balance, unless State law requires that foreclosure be withdrawn if
the account is brought current and a State supplement is issued to
specify this requirement. If payments are mistakenly accepted and
credited to the borrower\'s account, no waiver or prejudice to any
rights which the Untied States may have for breach of any promissory
note or covenants in the real estate instruments will result.
Disposition of such payments will be made after consultation with OGC.
The servicing official will notify the approval official of any offer
received from the borrower. This includes a request by the borrower for
an extension of time to accomplish voluntary liquidation or written
proposal to cure the default(s). The receipt of payment with no proposal
to cure the defaults is not considered a viable offer, and such payments
will be returned to the borrower. The approval official will decide
whether an offer from a borrower will be accepted and servicing on the
loan reinstated or whether foreclosure will be delayed to give the
borrower additional time to voluntarily liquidate as authorized in
servicing regulations for the type of loan involved. If an offer is

## 24

## (Revision 1) 

§1955.15 (d)(3)(ii) (Con.) RD Instruction 1955-A

received after the case has been referred to OGC, the approval official
will consult OGC before accepting or rejecting the offer. The denial of
an offer to stop foreclosure is not appealable. In all cases, the
approval official will notify the servicing official of the decision
made. For MFH loans, the National Office will be notified when
foreclosure is

## 24A

## (Added 12-30-93, SPECIAL PN)

(10-14-88) SPECIAL PN

§1955.15 (d)(3)(ii) (Con.) RD Instruction 1955-A

withdrawn. When an account is reinstated under this section, the
servicing official will grant or reinstate assistance for which the
borrower qualifies, such as interest credit on an SFH loan. When
granting interest credit is such a case:

\(A\) If an interest credit agreement expired after the account was
accelerated, the effective date will have the date the previous
agreement expired.

\(B\) If an interest credit agreement was not in effect when the account
was accelerated, the effective date will be the date foreclosure action
was withdrawn.

\(C\) For MFH loans with rental assistance, after acceleration and after
any appeal or review has been concluded, rental assistance will be
suspended if foreclosure is to continue. If the account is reinstated,
the rental assistance will be reinstated retroactively to the date of
suspension. In the interim, the tenants will continue rental payments in
accordance with their leases, and all rental rates and lease renewals
and provisions will be continued as if acceleration had not taken place.
(Revised 08-20-93, SPECIAL PN.)

\(4\) [Statement of account]{.underline}. If a statement of account is
required for foreclosure proceedings, Form RD 451-10, \"Request for
Statement of Account,\" will be processed in accordance with the FMI.
When an official statement of account is not required, account balances
and recapture information may be obtained from the field office
terminal.

\(5\) [Appeals]{.underline}. All appeals will be handled pursuant to
Subpart B of Part 1900 of this chapter. Foreclosure actions will be held
in abeyance while an appeal is pending. No case will be referred to OGC
for processing of foreclosure until a borrower\'s appeal and appeal
review have been concluded, or until the time has elapsed during which
an appeal or a request for review may be made. In Farmer Programs cases,
(except graduation cases under Subpart F of Part 1951 of this chapter),
the borrower must have received the appropriate notices and
consideration for primary loan servicing per Subpart S of Part 1951 of
this chapter. Any Farmer Programs cases involving appeals may be
accelerated after all primary loan servicing options have been
considered and all related appeals concluded, but will not be submitted
to OGC for foreclosure action until all appeals related to any
preservation rights have been concluded. (Revised 11-03-93, SPECIAL PN.)

25

(Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§1955.15 (d) (Con.)

\(6\) [Petition in bankruptcy filed by borrower after acceleration of
account]{.underline}.

\(i\) When bankruptcy is filed after an account has been accelerated,
any foreclosure action initiated by Rural Development must be suspended
until: (Revised 12-16-92, PN 196.)

\(A\) The bankruptcy case is dismissed or closed (a discharge of debtor
does not close the case);

\(B\) An Order lifting the automatic stay is obtained from the
Bankruptcy Court; or

\(C\) The property is no longer property of the bankruptcy estate
[and]{.underline} the borrower has received a discharge.

\(ii\) The State Director will request the assistance of OGC in
obtaining the Order(s) described in paragraph (d)(6)(i)(B) of this
section.

\(e\) [Referral of case]{.underline}. If the borrower fails to satisfy
the account during the period of time specified in the acceleration
notice, and no appeal is pending, the foreclosure process will continue:

\(1\) If the District Director is the approval official, he/she will
forward the case file with all pertinent documents and information
concerning the foreclosure action and appeal, if any, to the State
Director for completion of the foreclosure.

\(2\) If the State Director is the approval official, or in cases
referred by the District Director under paragraph (e)(1) of this
section, the State Director will forward to OGC the case file and all
documents needed by OGC to process the foreclosure. A State Supplement
will be issued, with the advice and assistance of OGC, to reflect the
make-up of the foreclosure docket. Since foreclosure processing varies
widely from State to State, each State Supplement will be explicit in
outlining step-by-step procedures. At the time indicated by OGC in the
foreclosure instructions, Form RD 1951-6, \"Borrower Account Description
Flag,\" will be processed in accordance with the FMI. After referral to
OGC, further actions will be in accordance with OGC\'s instructions for
completion of the foreclosure. If prior approval of the Administrator is
obtained, nonjudicial foreclosures for monetary default may be handled
as outlined in a State Supplement approved by OGC without referral to
OGC before foreclosure.

26

(Revision 3)

§1955.15 (Con.) RD Instruction 1955-A

\(f\) [Completion of foreclosure]{.underline}.

\(1\) [Foreclosure advertisement for organization loans subject to Title
VI of the Civil Rights Act of 1964]{.underline}. (Revised 12-30-93,
SPECIAL PN.)

\(i\) The advertisement for foreclosure sale of property subject to
Title VI of the Civil Rights Act of 1964 will contain a statement
substantially similar to the following: \"The property described herein
was purchased or improved with Federal financial assistance and is
subject to the nondiscrimination provisions of Title VI of the Civil
Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973 and
other similarly worded Federal statutes and regulations issued pursuant
thereto that prohibit discrimination on the basis of race, color,
national origin, handicap, religion, age or sex in programs or
activities receiving Federal financial assistance, for as long as the
property continues to be used for the same or similar purposes for which
the Federal assistance was extended or for so long as the purchaser owns
it, whichever is later.\" At least 30 days before the foreclosure sale,
the County Supervisor will notify, in writing, the Indian tribe which
has jurisdiction over the reservation and in which the real property is
owned by a Native American member of said tribe that a foreclosure sale
will be conducted to resolve this account, and will provide:

\(A\) Projected sale date and location;

\(B\) Fair market value of property;

\(C\) Amount Rural Development will bid on the property; and

\(D\) Amount of Rural Development debt against the property.

\(ii\) The purchaser will be required to sign Form\
RD 400-4, \"Assurance Agreement,\" if the property will be used for its
original or similar purposes.

\(2\) [Restrictive-use provisions for MFH loans]{.underline}. For MFH
loans, the advertisement will state the restrictive-use provisions which
will be included in any deed used to transfer title. (Added 08-20-93,
SPECIAL PN.)

\(3\) [Expenses]{.underline}. Expenses which are incurred in connection
with foreclosure, including legal fees, will be paid at the time
recommended by OGC by processing the necessary documents as

## 27

## (Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§1955.15 (f)(3) (Con.)

outlined in §1955.5 (d) of this subpart. Costs will be charged as
outlined in RD Instruction 2024-A (available in any Rural Development
office). (Revised 12-30-93, SPECIAL PN.)

\(4\) [Notice of judgment]{.underline}. In States with judicial
foreclosure, as soon as the foreclosure judgment is obtained, Form\
RD 1962-20, \"Notice of Judgment,\" will be processed in accordance with
the FMI. This will establish a judgment account to accrue interest at
the rate stated in the judgment order so that an accurate account
balance can be obtained for calculating the Government\'s foreclosure
bid. (Renumbered 08-20-93,\
SPECIAL PN.)

\(5\) [Gross investment]{.underline}. The gross investment is the sum of
the following: (Renumbered 08-20-93, SPECIAL PN.)

\(i\) The unpaid balance of one of the following, as applicable:

\(A\) In States with nonjudicial foreclosure, the borrower\'s Rural
Development account balance reflecting secured loan(s) and advances; and
where State law permits, unsecured debts; or

\(B\) In States with judicial foreclosure, the judgment account
established as a result of the foreclosure judgment in favor of Rural
Development.

\(ii\) All recoverable costs charged (or to be charged) to the
borrower\'s account in connection with the foreclosure action and other
costs which OGC advises must be paid from proceeds of the sale before
paying the Rural Development secured debt, including but not limited to
payment of real estate taxes and assessments, prior liens, legal fees
including U.S. Attorney\'s and U.S. Marshal\'s, and management fees; and

\(iii\) If a SFH loan subject to recapture of interest credit is
involved, the total amount of subsidy granted and principal reduction
attributed to subsidy.

\(6\) [Amount of Government\'s bid]{.underline}. Except for FP loans and
as modified by paragraph (f)(6)(ii) of this section, the Government\'s
bid will be the amount of Rural Development\'s gross investment or the
market value of the security, whichever is less. For

## 28

## (Revision 3) 

§1955.15 (f)(6) (Con.) RD Instruction 1955-A

real property located within the confines of a federally recognized
Indian reservation and which is owned by a Rural Development borrower
who is a member of the tribe with jurisdiction over the reservation, the
Government\'s bid will be the greater of the fair market value or the
Rural Development debt against the property, unless Rural Development
determines that, because of the presence of hazardous substances on the
property, it is not in the best interest of the Government to bid such
amount, in which case there may be a deduction from the bid for the
costs for hazardous material assessment and/or mitigation. For FP loans,
except as modified by paragraph (f)(6)(ii) of this section, the
Government\'s bid will be the amount of Rural Development\'s gross
investment or the amount determined by use of Exhibit G-1 of this
subpart, whichever is less. When the foreclosure sale is imminent, the
State Director must request the servicing official to submit a current
appraisal (in existing condition) as a basis for determining the
Government\'s bid. Except for MFH properties, if a Rural Development
appraiser is not available, the State Director may authorize an
appraisal to be obtained by contract from a source outside Rural
Development in accordance with RD Instruction 2024-A (available in any
Rural Development office). For MFH properties, prior approval of the
Assistant Administrator, Housing, is necessary to procure an outside
appraisal. (Revised 12-30-93, SPECIAL PN.)

\(7\) [Bidding]{.underline}. The State Director will designate an
individual to bid on behalf of the Government unless judicial
proceedings or State nonjudicial foreclosure law provide for someone
other than a Rural Development employee to enter the Government\'s bid.
When the State Director determines attendance of a Rural Development
employee at the sale might pose physical danger, a written bid may be
submitted to the Marshal, Sheriff, or other party in charge of holding
the sale. The Government\'s bid will be entered when no other party
makes a bid or when the last bid made will result in the property being
sold for less than the bid authorized in paragraph (f)(5) of this
section.

(Revised and Renumbered 08-20-93, SPECIAL PN.)

\(i\) When Rural Development is the senior lienholder, only one bid will
be entered, and that will be for the amount authorized by the State
Director.

\(ii\) When Rural Development is not the senior lienholder and OGC
advises that the borrower has no redemption rights or if a deficiency
judgement will be obtained, the State Director may authorize the person
who will bid for the Government to make incremental bids in competition
with other bidders.

## 28A

## (Revision 2)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.15(f)(7)(ii) (Con.)

If incremental bidding is desired, the State Director\'s instructions to
the bidder will state the initial bid, bidding increments, and the
maximum bid.

\(g\) [Reports on sale and finalizing foreclosure]{.underline}.
Immediately after a foreclosure sale at which the State Director has
designated a person to bid on behalf of the Government, the servicing
official will furnish the State Director a report on the sale. The State
Director will forward a copy of this report to OGC, and for MFH loans,
to the National Office. Based on OGC\'s instructions, a State Supplement
will provide a detailed outline of actions necessary to complete the
foreclosure.

§§ 1955.16 - 1955.17 \[Reserved\]

§ 1955.18 [Actions required after acquisition of property]{.underline}.

The approval official may employ the services of local designated
attorneys, on a case by case basis, to process all legal procedures
necessary to clear the title of foreclosed properties. Such attorneys
shall be compensated at not more than their usual and customary charges
for such work. Contracting for such attorneys shall be accomplished
pursuant to the Federal acquisition regulations and related procurement
regulations and guidance.

\(a\) [Reporting acquisition]{.underline}. When real or chattel property
is acquired by the Government, the servicing official will process Form
RD 1955-3, \"Advice of Property Acquired,\" and Form RD 1955-3A,
\"Acquired Property Maintenance,\" or Form RD 3560-19 "Status of REO
Property,\" and Form RD 3560-55, \"Multiple Family Housing Transfer of
Rental Assistance,\" (if the project has had rental assistance units),
according to the FMI immediately after a voluntary conveyance is closed,
a foreclosure sale is completed, or property is acquired by any other
means. The date of acquisition will be the date the deed to the
Government is recorded for a voluntary conveyance; the date of the
foreclosure sale. For FSA properties only, the date of acquisition will
be the date the deed to the Government is recorded for a voluntary
conveyance or foreclosure sale; or for chattels, the date the bill of
sale (and title, if applicable) is executed transferring ownership to
FSA. Form RD 1955-3 and Form RD 1955-3A or Form RD 3560-19 will be
processed promptly without waiting for the final report on sale from OGC
where required.\
A property identification number will be assigned in accordance with the
respective FMI. For MFH loans, the State Director will forward a copy of
Form RD 3560-19 to the National Office for monitoring purposes. For MFH
projects with rental assistance, Form RD 3560-55 must be attached

## 29

## (Revision 3)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.18(a) (Con.)

to Form RD 3560-19 indicating the status of the rental assistance while
the property is in inventory. The county official will report the
acquisition of farm property to the appropriate FSA official by
memorandum so that any allotments, marketing quotas or acreage bases
established for the property will not lapse, terminate, be reduced or
otherwise be adversely affected while the property is in inventory. The
State Director will report any adverse affects on allotments, marketing
quotas or acreage bases on any farm inventory property to the
Administrator. (Revised 02-24-05, SPECIAL PN.)

\(b\) [Existing lease]{.underline}. If property acquired by Rural
Development is\
under an existing written lease, a copy of the lease will be placed in
the case file. Any oral lease will be reduced to writing on Form\
RD 1955-20, \"Lease of Real Property.\" A lease account will be
established in the Finance Office records. If an existing lease is
terminated by foreclosure, a new lease may be considered pursuant to §
1955.66 of Subpart B of this part, except for MFH property for which
leasing as a project is generally not authorized.

\(1\) The servicing official will notify the lessee in writing that the
Government has acquired the former lessor\'s rights under the lease and
direct the lessee to remit all payments to Rural Development. Receipts
for collections will read: \"Lease proceeds from property formerly owned
by (borrower\'s name and case number) and leased to (lessee\'s name).\"
All lease proceeds collected will be remitted according to RD
Instruction 1951-B.

\(2\) Payments under an existing lease which were due and payable
[before]{.underline} the date the property is acquired will be applied
to any unsatisfied balance on the Rural Development account. If there is
a surplus, the Finance Office will forward a refund check payable to the
former borrower to the County or District Office for delivery to the
former borrower.

\(3\) Payments under an existing lease which are due and payable
[after]{.underline} the date the property is acquired will be applied to
the lease account.

\(c\) [Existing management agreement]{.underline}. For MFH and C&BP, if
a property is being managed on behalf of the borrower prior to
acquisition, the State Director will request the assistance of the
National Office in

## 30

## (Revision 3) 

RD Instruction 1955-A

§ 1955.18(c) (Con.)

determining if the agreement should be cancelled or extended. In any
event, management services should be obtained as soon as possible in
accordance with §1955.65 of Subpart B of this part.

\(d\) [Inventory account]{.underline}. The Finance Office will establish
an inventory account under the Property ID Number assigned. The value of
the property entered into the inventory account will be the market value
as of the date acquired. A suspend code may be established or removed
from an acquired property record by completion of Form\
RD 1955-3D, \"Acquired Property - Suspend Code,\" in accordance with the
FMI. (Revised 06-28-95, PN 247.)

## 30A

## (Revision 1)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.18 (Con.)

\(e\) [Credit to the borrower\'s account or foreclosure judgment
account]{.underline}.

\(1\) [For SFH accounts]{.underline}. When Rural Development acquired
the property, the account will be satisfied unless:

\(i\) In a voluntary conveyance case where the debt exceeds the market
value of the property and the borrower is not released from liability,
in which case the account credit will be the market value (less
outstanding liens if any); or

\(ii\) In a foreclosure when the bid is less than the account balance
and a deficiency judgment will be sought for the difference, in which
case the account credit will be the amount of Rural Development\'s bid.

\(2\) [For all types of accounts other than SFH]{.underline}. When the
Agency acquired the property, the account credit will be as follows:

\(i\) In a voluntary conveyance case:

\(A\) Where the market value of the property equals or exceeds the debt
or where the borrower is released from liability for any difference, the
account will be satisfied.

\(B\) When the debt exceeds the market value of the property and the
borrower is not released from liability, the account credit will be the
market value (less outstanding liens, if any).

\(ii\) In a foreclosure, the account credit will be the amount of the
Agency's bid except when incremental bidding as provided for in §
1955.15(f)(7)(ii) of this subpart was used, in which case the account
credit will be the maximum bid that was authorized by the State
Director. (Revised 08-20-93,\
SPECIAL PN.)

\(3\) [For all types of accounts when the Agency did not acquire the
property]{.underline}. The sale proceeds will be handled in accordance
with applicable State laws with the advice and assistance of OGC,
including remittance of funds, application of the borrower\'s account
credit, and disbursement of any funds in excess of the amount due the
Agency.

## 31

## (Revision 7)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.18(e) (Con.)

\(4\) [In cases where the Agency acquired security property by means
other than voluntary conveyance or foreclosure]{.underline}. In these
cases, such as conveyance by a bankruptcy trustee or by Court Order, the
account credit will be as follows:

\(i\) If the market value of the acquired property equal or exceeds the
debt, the account will be satisfied.

\(ii\) If the debt exceeds the market value of the acquired property,
the account credit will be the market value.

\(f\) [Unsatisfied account]{.underline}. Farmer Program loan borrowers
will be sent a letter similar to Exhibit F of this subpart. Unsatisfied
account balances will be settled in accordance with Subparts B or C of
Part 1956 of this chapter or the account will be reclassified to
collection-only. The Appropriate field office will process active to
collection-only via the Agency field office terminal system. After
reclassification to collection-only, Form RD 450-10, \"Advice of
Borrower\'s Change of Address, Name, Case Number, or Loan Number,\" or
for MFH, Form\
RD 1944-54, \"Multiple Family Housing Change of Borrower Name/Address/
Case Number/Project Number/Loan Number,\" will be submitted to the
Finance Office to furnish the borrower\'s new address, if known.
Collection-only accounts will be serviced in accordance with § 1951.7 of
Subpart A of Part 1951 of this chapter. (Revised 11-10-99, PN 312.)

\(g\) [Deficiency judgment]{.underline}. When a deficiency judgment is
to be sought, the State Director will initiate action pursuant to §
1962.49 of\
Subpart A of Part 1962 of this chapter. When a judgement is obtained,
the State Director will prepare Form RD 1962-20 in accordance with FMI
to establish a judgment account to be serviced pursuant to § 1962.49(e)
of Subpart A of Part 1962 of this chapter. The field office will process
the judgment or the third party judgment via the field office terminal
system. If attempts to obtain a judgment are not successful, the
remaining debt will be settled or serviced pursuant to § 1951.7 of
Subpart A of Part 1951 of this chapter. (Revised 08-29-90, PN 143.)

\(h\) [Homestead protection]{.underline}. Not later than the date of
acquisition of a real property by FSA, the County official will notify
the borrower-owner of homestead protection rights by sending Exhibit M
of FSA transferred Instruction 1951-S to the borrower-owner certified
mail, return receipt requested. (Revised 11-10-99, PN 312.)

## 32

## (Revision 7) 

RD Instruction 1955-A

§ 1955.18 (Con.)

\(i\) [Priority disposal of inventory property]{.underline}. Before any
farm property which secured a Farmer Program loan is sold, the County
official shall initially attempt to dispose of the property in
accordance with the Homestead Protection program (see Subpart S of Part
1951 of this chapter). After the former owner/operator\'s rights have
been concluded, the County official will dispose of the property in
accordance with Subpart C of this part. (Renumbered and revised
08-20-97, PN 280.)

\(j\) [Debt Settlement]{.underline}. For FP cases, the County Supervisor
should debt settle any remaining Agency indebtedness in accordance with
Subpart B of Part 1956 of this chapter. (Renumbered 08-20-97, PN 280.)

\(k\) [Effect of acquisition on tenants in multi-family
projects]{.underline}.\
(Renumbered 08-20-97, PN 280.)

\(1\) After Rural Development acquires title to the project, tenant
leases and renewals will be continued and managed in accordance with the
provisions of Subpart B of Part 1924 of this chapter.

\(2\) If the project is subsequently sold to a purchaser not using Rural
Development financing, but is considered needed for affordable housing
purposes, restrictive-use provisions will be inserted in the deed. The
purchaser will be expected to operate the project in accordance with the
applicable provisions of Subpart B of Part 1924 of this chapter and 7
CFR part 3560, subpart N. (Revised 02-24-05, SPECIAL PN.)

§ 1955.19 \[Reserved\]

## 33

## (Revision 5)

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§ 1955.20 [Acquisition of chattel property]{.underline}.

Every effort will be made to avoid acquiring chattel property by having
the borrower or the Agency liquidate the property according to Subpart A
of Part 1962 of this chapter and apply the proceeds to the borrower\'s
account(s). Methods of acquisition authorized are:

\(a\) [Purchase at the following types of sale]{.underline}:

\(1\) Execution sale conducted by the U.S. Marshal, sheriff or other
party acting under Court order to satisfy judgment liens.

\(2\) Agency foreclosure sale conducted by the U.S. Marshal or sheriff
in States where a State Supplement provides for sales to be conducted by
them.

\(3\) Sale by trustee in bankruptcy.

\(4\) Public sale by prior lienholder.

\(5\) Public sale conducted under the terms of Form RD 455-4,
\"Agreement for Voluntary Liquidation of Chattel Security,\" the power
of sale in security agreements or crop and chattel mortgage, or similar
statements, if authorized by State Supplement.

\(b\) [Voluntary conveyance]{.underline}. Voluntary conveyance of
chattels will be accepted only when the borrower can convey ownership
free of other liens and the borrower can be released from liability
under the conditions set forth in § 1955.10(f)(2) or (3) of this
Subpart. Payment of other lienholders\' debts by the agency in order to
accept voluntary conveyance of chattels is not authorized. Before a
voluntary conveyance from a Farmer Program loan borrower can be
accepted, the borrower must be sent Exhibit A with Attachments 1 and 2
of Subpart S of Part 1951 of this chapter.

\(1\) [Offer]{.underline}. The borrower\'s offer of voluntary conveyance
will be made on Form RD 1955-1. If it is determined the conveyance offer
can be accepted, the borrower will execute a bill of sale itemizing each
item of chattel property being conveyed and will provide titles to
vehicles or other equipment, where applicable.

\(2\) [Acceptance of offer and release from liability]{.underline}.
Before accepting an offer to convey chattels to the Agency, the
concurrence of the State Director must be obtained. When chattel
security is voluntarily conveyed to the Government and the borrower and
cosigner(s), if any, are to be released from liability, the

## 34

## (Revision 5) 

RD Instruction 1955-A

§ 1955.20(b)(2) (Con.)

servicing official will stamp the note(s) \"Satisfied by Surrender of
Security and Borrower Released from Liability.\" When the Agency debt
less the market value and prior liens is \$1 million or more (including
principal, interest and other charges), release of liability must be
approved by the Administrator or designee; otherwise, the State Director
must approve the release of liability. All cases requiring a release of
liability will be submitted for review in accordance with Exhibit A of
subpart B of Part 1956 of this chapter (available in any CFSA Office).
Form RD 1955-1 will be executed by the servicing official showing
acceptance by the Government, and the satisfied note(s) and a copy of
Form RD 1955-1 will be furnished to the borrower. (Revised 05-31-95, PN
246.)

\(3\) [Release of lien(s)]{.underline}. When an offer has been accepted
as outlined in paragraph (b)(2) of this section, the servicing official
will release any liens of record which secured the satisfied
indebtedness.

\(4\) [Rejection of offer]{.underline}. If it is determined an offer of
voluntary conveyance will not be accepted, the servicing official will
indicate on Form RD 1955-1 that the offer is rejected, execute the form,
and furnish a copy to the borrower.

\(c\) [Attending sales]{.underline}. The servicing official will:

\(1\) Attend all sales described in paragraph (a)(5) of this section
unless an exception is authorized by the State Director because of
physical danger to the CFSA employee or adverse publicity would be
likely.

## 34A

## (Revision 1)

(10-14-88) SPECIAL PN

§1955.20 (Con.) RD Instruction 1955-A

\(2\) Attend public sales by prior lienholders when the market value of
the chattel property is significantly more than the amount of the prior
lien(s).

\(3\) Obtain the advice of the State Director on attending sales
described in paragraphs (a)(l), (2) and (3) of this section.

\(d\) [Appraising chattel property]{.underline}. Prior to the sale, the
servicing official will appraise chattel property using Form RD 440-21,
\"Appraisal of Chattel Property.\" If a qualified appraiser is not
available to appraise chattel property, the State Director may obtain an
appraisal from a qualified source outside Rural Development by contract
in accordance with RD Instruction 2024-A (available in any Rural
Development Office).

\(e\) [Abandonment of security interest]{.underline}. The State Director
may authorize abandonment of the Government\'s security interest when
chattel property, considering costs of moving or rehabilitation, has no
market value and obtaining title would not be in the best interest of
the Government.

\(f\) [Bidding at sale]{.underline}.

\(1\) The servicing official is authorized to bid at sales described in
paragraph (a) of this section. Ordinarily, only one bid will be made on
items of chattel security unless the State Director authorizes
incremental bidding. Bids will be made only when no other party bids or
when it appears bidding will stop and the property will be sold for less
than the amount of the Government\'s authorized bid. When the State
Director determines attendance of an Rural Development employee might
pose physical danger, a written bid may be submitted to the party
holding the sale. The bid(s) will be the lesser of:

\(i\) The market value of the item(s) less the estimated costs involved
in the acquisition, care, and sale of the item(s) of security; or

\(ii\) The unpaid balance of the borrower\'s secured Rural Development
debt plus prior liens, if any.

\(2\) Bids will not be made in the following situations unless
authorized by the State Director:

\(i\) When chattel property under prior lien has a market value which is
not significantly more than the amount owed the prior lienholder. If
Rural Development holds a junior lien on several items of chattel
property, advice should be obtained from the State Director on bidding.

## 35

(10-14-88) SPECIAL PN

RD Instruction 1955-A

§1955.20(f)(2) (Con.)

\(ii\) After sufficient chattel property has been bid in by Rural
Development to satisfy the Rural Development debt; prior liens, and
costs of the sale.

\(iii\) When the sale is being conducted by a lienholder junior to Rural
Development.

\(iv\) At a private sale.

\(v\) When the sale is being conducted under the terms of Form RD 455-3,
\"Agreement for Sale by Borrower (Chattels and/or Real Estate).\"

\(g\) [Payment of costs]{.underline}. Costs to be paid by Rural
Development in connection with acquisition of chattel property will be
paid as outlined in §1955.5(d) of this subpart as recoverable costs.
NOTE: Payment of other lienholders, debts in connection with voluntary
conveyance of chattels is not authorized.

\(h\) [Reporting acquisition of chattel property]{.underline}.
Acquisition of chattel property will be reported by use of Form RD
1955-3 processed in accordance with the FMI.

§1955.21 [Exception authority]{.underline}.

The Administrator may, in individual cases, make an exception to any
requirement or provision of this subpart or address any omission of this
subpart which is not inconsistent with the authorizing statute or other
applicable law if the Administrator determines that the Government\'s
interest would be adversely affected or the immediate health and/or
safety of tenants or the community are endangered if there is no adverse
effect on the Government\'s interest. The Administrator will exercise
this authority upon the request of the State Director with
recommendation of the appropriate program Assistant Administrator; or
upon request initiated by the appropriate program Assistant
Administrator. Requests for exceptions must be made in writing and
supported with documentation to explain the adverse effect, propose
alternative courses of action, and show how the adverse effect will be
eliminated or minimized if the exception is granted.

§1955.22 [State Supplements]{.underline}.

State Supplements will be prepared with the assistance of OGC as
necessary to comply with State laws or only as specifically authorized
in this regulation to provide guidance to Rural Development officials.
State Supplements will be submitted to the National Office for post
approval in accordance with RD Instruction 2006-B (available in any
Rural Development Office).

§§1955.23 - 1955.49 \[Reserved\]

## 36 

RD Instruction 1955-A

§1955.50 [OMB control number]{.underline}.

The collection of information requirements in this regulation have been
approved by the Office of Management and Budget and assigned OMB control
number 0575-0109. Public reporting burden for this collection of
information is estimated to vary from 5 minutes to 5 hours per response,
with an average of .56 hours per response including time for reviewing
instructions, searching existing data sources, gathering and maintaining
the data needed, and completing and reviewing the collection of
information. Send comments regarding this burden estimate or any other
aspect of this collection of information, including suggestions for
reducing this burden, to Department of Agriculture, Clearance Officer,
OIRM, Room 404-W, Washington, DC 20250; and to the Office of Management
and Budget, Paperwork Reduction Project (OMB #0575-0109), Washington, DC
20503. (Revised 02-13-92, SPECIAL PN.)

Attachments: Exhibits A, B, C, D, E, E-1, F, G, G-1, H, I, and J.

## oOo

## 37

## (Revision 3)

(10-14-88) SPECIAL PN

RD 1955-A, Exhibit A in PDF ONLY.

RD Instruction 1955-A

Exhibit B

Page 1

FORMAT FOR NOTICE OF ACCELERATION TO BORROWERS OTHER THAN FP AND MFH

PERSONALLY LIABLE FOR THE DEBT. (EXCLUDES BORROWERS WHO WERE DISCHARGES
IN BANKRUPTCY AND DID NOT REAFFIRM THE DEBT.)

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

(Name and Address)

Subject: NOTICE OF ACCELERATION OF YOUR DEBT TO RURAL DEVELOPMENT

DEMAND FOR PAYMENT OF THAT DEBT, AND NOTICE

OF YOUR OPPORTUNITY TO HAVE A HEARING CONCERNING THIS ACTION.

Dear

PLEASE TAKE NOTE that the entire indebtedness due on the promissory
note(s) and/or assumption agreement(s) which evidence the loan(s)
received by you from the United States of America, acting through Rural
Development, United States Department of Agriculture is now declared
immediately due and payable. They are described as follows:

[Date of Instrument]{.underline} [Amount]{.underline}

The promissory note(s) and/or assumption agreement(s) is (are) secured
by real estate mortgage(s) \[or deed(s) of trust\] described as follows:

Recorded In:

[Date of Instrument]{.underline} [Place of Recordation]{.underline}
[Book No. Page No.]{.underline}

(2-15-89) PN 102

RD Instruction 1955-A

Exhibit B

Page 2

This acceleration of your indebtedness is made in accordance with the
authority granted in the above-described real estate instrument(s).

The reason(s) for this acceleration of your indebtedness is(are) as
follows:

\[If the account is in monetary default, list this as one reason for
accelerating. If the account is not in monetary default, see
§1955.15(d)(2)(ii) of this subpart.\]

The indebtedness due is \$ unpaid principal, and \$ unpaid interest, as
of 19 , plus additional interest accruing at the rate of \$ per day
thereafter, plus any advances to be made by the United States for the
protection of its security and interest accruing on any such advances,
and the amount of subsidy to be recaptured in accordance with the
Subsidy Repayment Agreement on the loan(s) which is(are) subject to
recapture. Unless full payment of your indebtedness is received within
30 days from the date of this letter, the United States will take action
to foreclose the above described real estate instrument and to pursue
any other available remedies.

Payment should be made by cashier\'s check, certified check, or postal
money orders, to the County Supervisor of Rural Development. If you
submit to the United States any payment insufficient to pay the entire
indebtedness or insufficient to comply with any arrangements agreed to
between Rural Development and yourself, that payment WILL NOT CANCEL the
effect of this notice. If insufficient payments are received and
credited to your account, no waiver or prejudice of or rights which the
United States may have for breach of any promissory note or covenant in
the real estate instrument will result are Rural Development may proceed
as though no payment had been made.

\[The above-described real estate instrument provides that the United
States may foreclose without Court action by selling the real estate at
public sale after . The Government intends to sell the property in this
manner. No further notice is required to be given you concerning this
foreclosure.\] (This paragraph will be omitted in States with judicial
foreclosure or where it conflicts with State laws.)

However, you have the opportunity to have an informal meeting with the
decision maker (the undersigned) and/or an administrative appeal hearing
before the foreclosure takes place. This is an opportunity to discuss
why you believe the United States is in error in accelerating your
account(s) and proceeding with foreclosure. If you desire to have an
informal meeting with the decision maker or have any questions
concerning the decision and/or facts used in making our decision, you
should contact this office in writing to request a meeting. The request
for an informal meeting must be

RD Instruction 1955-A

Exhibit B

Page 3

(Revision 1)

sent to the undersigned no later than (give date 15 days after the
mailing of the letter). Requests which are postmarked by the U.S. Postal
Service on or before that date will be considered as timely received.
You also have the right to an administrative appeal hearing with a
hearing officer in lieu of, or in addition to, a meeting with this
office. If you request an informal meeting with the decision maker, and
the meeting does not result in a decision in which you concur, you will
be given a separate time frame in which to submit your request for an
administrative appeal. See the attachment for your appeal rights.

If you do not wish to have an informal meeting with the decision maker
as outlined above, you may request an administrative appeal hearing with
a member of the National Appeals Staff. The request for an
administrative appeal must be sent to the National Appeals Staff, Area
Supervisor, (show complete mailing address), no later than (give date 30
days after the mailing of the letter). Requests which are postmarked by
the U.S. Postal Service on or before that date will be considered as
timely received. If requesting an administrative appeal, please include
a copy of this letter with your request.

If you fail to comply with the requirements outlined herein, the United
States plans to proceed with foreclosure.

The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, marital status, handicap, or age
(provided that the applicant has the capacity to enter into a binding
contract), because all or part of the applicant\'s income derives from
any public assistance program, or because the applicant has in good
faith exercised any right under the Consumer Credit Protection Act. The
Federal agency that administers compliance with the law concerning this
creditor is the Federal Trade Commission, Equal Credit Opportunity,
Washington, D.C. 20580.

UNITED STATES OF AMERICA

BY\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[\* \]

Rural Development

United States Department of

Agriculture

Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Attachment

\*Insert title of Rural Development official authorized in §1955.15 of
this subpart to accelerate the account, depending on loan type.

(ATTACH A COPY OF Form RD 1900-1)

(2-15-89) PN 102

RD Instruction 1955-A

Exhibit C

Page 1

FORMAT FOR NOTICE OF ACCELERATION TO BORROWERS OTHER THAN FP AND MFH

DISCHARGED IN BANKRUPTCY WHO HAVE NOT REAFFIRMED THE DEBT.

[CERTIFIED MAIL]{.underline}

[RETURN RECEIPT REQUESTED]{.underline}

(Name and Address)

Subject: [NOTICE OF ACCELERATION OF YOUR RURAL DEVELOPMENT]{.underline}

[ACCOUNT AND NOTICE OF YOUR OPPORTUNITY TO HAVE A HEARING]{.underline}

[CONCERNING THIS ACTION]{.underline}

Dear

PLEASE TAKE NOTE that Rural Development intends to enforce its real
estate \[mortgage(s), deed(s) of trust, etc.\] given or assumed by you
as security for the following-described promissory note(s) and/or
assumption agreement(s) and declares the indebtedness immediately due
and payable.

[Date of Instruments]{.underline} [Amount]{.underline}

The security instrument(s) referred to above are described as follows:

Recorded In:

[Date of Instrument]{.underline} [Place of Recordation]{.underline}
[Book No. Page No.]{.underline}

The decision to foreclose is made in accordance with the authority
granted in the above-described real estate instrument(s) for the
following reason(s):

\[lf the account is in monetary default, list this as one reason for
accelerating. If the account is not in monetary default, see §1955.15
(d)(2)(ii) of this subpart.\]

The balance of the account is \$\_\_\_\_\_\_\_\_\_\_\_\_\_ unpaid
principal, and \$\_\_\_\_\_\_\_\_\_\_\_\_\_ unpaid interest, as of 19 ,
plus additional

(2-15-89) PN 102

RD Instruction 1955-A

Exhibit C

Page 2

interest accruing at the rate of \$\_\_\_\_\_\_\_ per day thereafter,
plus any advances to be made by the United States for the protection of
its security, the interest accruing on any such advances, and the amount
of subsidy to be recaptured in accordance with the Subsidy Repayment
Agreement on the loan(s) which is(are) subject to recapture.

Unless full payment of this account is received within 30 days from the
date of this letter, the United States will take action to foreclose
under the authority granted in the above-described instrument(s) and to
pursue any other available remedies. Payment should be made by
cashier\'s check, certified check, or postal money orders, to the County
Supervisor of Rural Development.

If you submit to the United States any payment insufficient to pay the
account in full or insufficient to comply with any arrangements agreed
to between the Rural Development and yourself, that payment WILL NOT
CANCEL the effect of this notice. If insufficient payments are received
and credited to your account, no waiver or prejudice of any rights which
the United States may have for breach of any promissory note or covenant
in the real estate instrument will result and the Rural Development may
proceed as though no such payments had been made.

\[The above-described real estate instrument provides that the United
States may foreclose without Court action by selling the real estate at
public sale after . The Government intends to sell the property in this
manner. No further notice is required to be given you concerning this
foreclosure.\] (This paragraph will be omitted in States with judicial
foreclosure or where it conflicts with State law.)

However, you have the opportunity to have an informal meeting with the
decision maker (the undersigned) and/or an administrative appeal hearing
before the foreclosure takes place. This is an opportunity to discuss
why you believe the United States is in error in accelerating your
account(s) and proceeding with foreclosure. If you desire to have an
informal meeting with the decision maker or have any questions
concerning the decision and/or facts used in making our decision, you
should contact this office in writing to request a meeting. The request
for an informal meeting must be sent to the undersigned no later than
(give date 15 days after the mailing of the letter). Requests which are
postmarked by the U.S. Postal Service on or before that date will be
considered as timely received. You also have the right to an
administrative appeal hearing with a hearing officer in lieu of, or in
addition to, a meeting with this office. If you request an informal
meeting with the decision maker, and the meeting does not result in a
decision in which you concur, you will be given a separate time frame in
which to submit your request for an administrative appeal. See the
attachment for your appeal rights.

RD Instruction 1955-A

Exhibit C

Page 3

(Revision 1)

If you do not wish to have an informal meeting with the decision maker
as outlined above, you may request an administrative appeal hearing with
a member of the National Appeals Staff. The request for an
administrative appeal must be sent to the National Appeals Staff, Area
Supervisor, (show complete mailing address), no later than (give date 30
days after the mailing of the letter). Requests which are postmarked by
the U.S. Postal Service on or before that date will be considered as
timely received. If requesting an administrative appeal, please include
a copy of this letter with your request.

If you fail to comply with the requirements outlined herein, the United
States plans to proceed with foreclosure.

The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, martial status, handicap, or age
(provided that the applicant has the capacity to enter into a binding
contract), because all or part of the applicant\'s income derives from
any public assistance program, or because the applicant has in good
faith exercised any right under the Consumer Credit Protection Act. The
Federal Agency that administers compliance with the law concerning this
creditor is the Federal Trade Commission, Equal Credit Opportunity,
Washington, D.C. 20580.

UNITED STATES OF AMERICA

BY \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\[\* \]

Rural Development

United States Department of

Agriculture

Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Attachment

\*Insert title of Rural Development official authorized in §1955.15 of
this subpart to accelerate the account, depending on loan type.

(ATTACH A COPY OF Form RD 1900-1)

(2-15-89) PN 102

RD Instruction 1955-A

Exhibit D to Subpart A

Page 1

NOTICE OF ACCELERATION OF FARMER PROGRAM LOAN ACCOUNTS SECURED BY REAL
ESTATE AND/OR CHATTELS IN CASES NOT INVOLVING BANKRUPTCY

CERTIFIED MAIL

RETURN RECEIPT REQUESTED
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Name and Address) Date

Subject: [NOTICE OF ACCELERATION OF YOUR DEBT TO THE FARM SERVICE
AGENCY]{.underline}

[AND DEMAND FOR PAYMENT OF THAT DEBT]{.underline}

Dear\_\_\_\_\_\_\_\_\_\_\_\_\_:

PLEASE NOTE that the entire indebtedness due on the promissory note(s)
and/or assumption agreement(s) which evidence the loan(s) received by
you from the United States of America, acting through the Farm Service
Agency, United States Department of Agriculture is now declared
immediately due and payable They are described as follows:

[Date of Instrument]{.underline} [Amount]{.underline}

The promissory note(s) and/or assumption agreement(s) is(are) secured by
(real estate mortgage(s), deed(s) of trust, security agreement(s),
financing statement(s), etc.) described (Perfected) as follows:

[Recorded In]{.underline}: [Book No]{.underline}. [Amount]{.underline}

[Date of Instrument]{.underline} [Place of Recordation
(Filing)]{.underline} [(Recorded under Document No.)]{.underline}

This acceleration of your indebtedness is made in accordance with the
authority granted in the above-described instrument(s). (Revised
12-3-86, PN 33 )

The reason(s) for the acceleration of your indebtedness is(are) as
follows:

(lf the borrower is in monetary default, list this as one reason for
accelerating. If the borrower is not in monetary default, see
§1955.15(d) (2) (ii).)1

(10-14-88) SPECIAL PN

RD Instruction 1955-A

Exhibit D to Subpart A

Page 2

The indebtedness due is \$ \_\_\_\_\_ unpaid principal, and
\$\_\_\_\_\_\_ unpaid interest, as of\_\_\_\_\_\_\_\_\_, 19\_\_, plus
additional interest accruing at the rate of \$\_\_\_ per day thereafter,
plus any advances made by the United States for the protection of its
security and interest accruing on any such advances. Unless full payment
of your indebtedness is received made by one of the methods described
below within 30 days from the date of this letter, the United States
will foreclose the above described security instrument(s) and to pursue
any other available remedies.

\(1\) Full payment may be made in any of the following ways:

\(A\) CASH

Payment should be made by cashier\'s check, certified check, or postal
money order payable to the Farm Service Agency and delivered to the
County Supervisor of the Farm Service Agency at
[\_\_(Street]{.underline} [Address or P.O.
Box)\_]{.underline},[\_\_\_\_(City)\_]{.underline},
[\_\_\_\_(State)\_]{.underline},[\_\_\_\_(Zip)\_]{.underline}, if you
submit to the United States any payment insufficient to pay the account
in full or insufficient to comply with any arrangements agreed to
between the Farm Service Agency and yourself, that payment [WILL NOT
CANCEL]{.underline} the effect of this notice. If such insufficient
payments are received and credited to your account, no waiver or
prejudice of any rights which the United States may have for breach of
any promissory note or covenant in the security instrument(s) will
result and the Farm Service Agency may proceed as though no such payment
had been made.

\(B\) TRANSFER AND ASSUMPTION

You may transfer the collateral for your loan(s) to someone who is
willing and able to assume the debt. Contact the County Supervisor
immediately if you are interested in this.

\(C\) SALE

You may sell the collateral for your loan(s) for its fair market value
and send the proceeds to the Farm Service Agency or to other creditors
with liens prior to Rural Development\'s lien. Contact the County
Supervisor immediately if you are interested in this.

\* (D) VOLUNTARY CONVEYANCE

You may convey all of your collateral to the Government. Contact the
County Supervisor immediately if you are interested in this.

\*\* (The above-described security instrument(s) provides that the
United States may foreclose without court action by selling the property
at public sale after\_\_\_\_\_\_\_\_\_, the government intends to sell
the property in this manner.)

RD Instruction 1955-A

Exhibit D to Subpart A

Page 3

\*\*\* If you have not been advised of your rights to request deferral
of payments or other servicing options you should contact the County
Supervisor at the above mentioned address within 15 days of the receipt
of this notice.

If you fail to comply with the requirements outlined in this notice
within the next 30 days, the United States plans to proceed with
foreclosure/liquidation

YOU DO NOT HAVE ANY RIGHT TO APPEAL THIS DECISION TO ACCELERATE YOUR
FARM SERVICE AGENCY DEBT(S) TO ANY OFFICIAL OF THE FARM SERVICE AGENCY.

UNITED STATES OF AMERICA

BY\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

District Director

Farm Service Agency

United States Department

of Agriculture

\* (This will be included as an option only if it would be in the
Government\'s financial interest to accept a voluntary conveyance
offer.)

\*\* (This paragraph will be omitted in States with judicial foreclosure
or if it conflicts with State law.)

\*\*\* (This paragraph will be omitted when accelerating accounts for
failure to graduate or accelerating accounts of Non Program Loan
debtors.)

## oOo

(10-14-88) SPECIAL PN

RD Instruction 1955-A

Exhibit E

Page 1

## NOTICE OF INTENT TO FORECLOSE ON YOUR PROPERTY SERVING

## AS SECURITY FOR THE UNITED STATES OF AMERICA

## AND ACCELERATE FARM SERVICE AGENCY LOAN ACCOUNTS

## ***Use only with OGC approval***

## 

## ***Format on FSA letterhead.*** 

## 

CERTIFIED MAIL \# \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date

RETURN RECEIPT REQUESTED

(Name and Address)

Subject: [NOTICE OF INTENT TO FORECLOSE ON YOUR PROPERTY SERVING
AS]{.underline}

[SECURITY FOR THE UNITED STATES OF AMERICA AND ACCELERATION]{.underline}

[OF YOUR LOAN ACCOUNTS]{.underline}

Dear \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_:

The United States of America intends to enforce its *(real estate
mortgages, deeds of trust, security agreements, etc.)* given or assumed
by you as security for your loans. The security instruments referred to
above as described below were perfected as follows:

Recorded In:

Date of Place of Book No. Page No.

[Instrument]{.underline} [Recordation (Filing)]{.underline} [Recorded
Under Document]{.underline}

The security instruments executed by you in favor of the United States
are not affected by a discharge in bankruptcy and the security can still
be foreclosed upon or liquidated to satisfy the secured debt, [although
a discharge under the Bankruptcy Code does render any debt discharged
unenforceable as your personal obligation]{.underline}. If the proceeds
from that sale are not sufficient to pay off the debt, the [United
States will not seek a personal judgment against you for any
deficiency]{.underline}. This letter is not intended as an act to
collect or recover any debt from you for which your personal obligation
has been discharged, but rather is intended to inform you that the
United States intends to collect as much of the secured debt as possible
from the property which serves as

(01-29-97) PN 271

RD Instruction 1955-A

Exhibit E

Page 2

security for the loans made to you. In order to do so, it is necessary
for your loans to be accelerated. Therefore, pursuant to the terms of
the loan instruments, the United States is now exercising its option to
declare your

entire debt immediately due and payable. Any Farm Credit Programs family
living and farm operating expenses which you may be receiving are hereby
terminated.

The reasons for taking this action are as follows:

\[If the loan account is in monetary default, list this as one reason
for accelerating. If the loan account is not in monetary default, see

§1955.15(d)(2)(ii) of this subpart.\]

The loan instruments are described as follows:

[Date of Instrument]{.underline} [Amount]{.underline}

The United States will not file its foreclosure action or liquidate its
security, under the authority granted in the above-described
instruments, for 30 days. During that period you may purchase the
property for the present market value, which the Farm Service Agency has
appraised to be \$ \_\_\_\_\_\_\_\_\_\_\_. Payment should be made by
cashier\'s check, certified check, or postal money order payable to the
Farm Service Agency and delivered to the county official at [(street
address, (City), (State) (Zip Code)]{.underline}.

**\*** You may not stop the foreclosure by paying an amount less than
the present market value.

**\*\***The above-described security instruments provide that the United
States may foreclose without Court action by selling the property at
public sale after \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. The Government
intends to sell the property in this manner.

UNITED STATES OF AMERICA

By \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Farm Service Agency

United States Department of

Agriculture

**\*** \[This sentence can only be used with the approval of the
Regional OGC.\]

**\*\***\[This paragraph will be omitted in States requiring judicial
foreclosure or if it conflicts with State law.\]

## 

## oOo 

RD Instruction 1955-A

Exhibit E-1 to Subpart A

Page 1

## NOTICE OF ACCELERATION OF FARMER PROGRAM LOAN ACCOUNTS SECURED BY REAL ESTATE AND/OR CHATTELS IN CASES INVOLVING CHAPTER 11, 12, AND 13 BANKRUPTCY BORROWERS

## 

## (Use only with OGC\'s approval for borrowers discharged under

## Chapters 11, 12, or 13)

CERTIFIED MAIL \# \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date

RETURN RECEIPT REQUESTED

(Name and Address)

Subject: [NOTICE OF ACCELERATION OF YOUR DEBT TO THE AGENCY BASED ON
A]{.underline}

[CONFIRMED BANKRUPTCY PLAN AND]{.underline} [DEMAND FOR PAYMENT OF THAT
DEBT]{.underline}

Dear \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_:

PLEASE TAKE NOTE that the entire indebtedness due under the Chapter
\_\_\_\_\_ Plan confirmed on \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ in
Bankruptcy Case No. \_\_\_\_\_\_\_\_\_ which evidences the loan(s)
received by you from the United States of America, acting through the
Agency, United States Department of Agriculture is now declared
immediately due and payable. The obligation set out in the Chapter
\_\_\_ Plan is described as follows:

[Date of Obligation]{.underline} [Amount]{.underline}

The amount(s) set out in the confirmed Chapter \_\_\_ Plan is/are
secured by \[real estate mortgage(s), deed(s) of trust, security
agreement(s), financing statement(s), etc.\] described (perfected) as
follows:

Recorded In:

Date of Place of Book No. Page No.

[Instrument]{.underline} [Recordation (Filing)]{.underline} [(Recorded
under Documents No.)]{.underline}

The acceleration of your indebtedness is made in accordance with the
authority granted in the above-described instrument(s). Although, this
is [not]{.underline} an acceleration of your debt owed to the Agency
prior to confirmation of the Chapter \_\_\_ Plan, it [is]{.underline}
fully effective to accelerate the debt as set out in the Chapter \_\_\_
Plan.

The reason(s) for the acceleration of your indebtedness is(are) as
follows:

(12-16-92) PN 196

RD Instruction 1955-A

Exhibit E-1 to Subpart A

Page 2

\[If debt under the confirmed Chapter \_\_\_ Plan is in monetary
default, list this as one of the reasons. If the debt is not in monetary
default, see §1955.15 (d)(2)(ii) of this subpart.\]

The indebtedness due as result of your Chapter \_\_\_\_\_ Plan is
\$ \_\_\_\_\_\_\_\_\_\_\_\_ unpaid principal, and \$
\_\_\_\_\_\_\_\_\_\_\_\_ unpaid interest, as of
\_\_\_\_\_\_\_\_\_\_\_, 19\_\_, plus additional interest accruing at the
rate of \$\_\_\_\_\_\_\_\_\_\_ per day thereafter, plus any advances
made by the United States for the protection of its security and
interest accruing on any such advances. Unless full payment of your
indebtedness is received, made by one of the methods described below,
within 30 days from the date of this letter, the United States will
foreclose the above described security instrument(s) and pursue any
other available remedies.

Full payment may be made in any of the following ways:

\(A\) CASH

Payment should be made by cashier\'s check, certified check, or postal
money order payable to the Agency and delivered to the Agency County
Supervisor at [(Street Address or P.O. Box), (City) , (State) (Zip
Code)]{.underline} . If you submit to the United States any payment
insufficient to pay the account in full or insufficient to comply with
any arrangements agreed to between the Agency and yourself, that payment
[WILL NOT CANCEL]{.underline} the effect of this notice. If such
insufficient payments are received and credited to your account, no
waiver or prejudice of any rights which the United States may have for
breach of any promissory note or debt evidenced by your confirmed
Chapter \_\_\_ Plan or covenant in the security instrument(s) will
result and the Agency may proceed as though no such payment had been
made.

\(B\) TRANSFER AND ASSUMPTION

Subject to Agency approval, you may transfer the collateral for your
debt to someone who is eligible for Agency assistance and is willing and
able to assume the debt. Contact the County Supervisor immediately if
you are interested in this.

\(C\) SALE

You may sell the collateral for your loan(s) for its fair market value
and send the proceeds to Rural Development to or other creditors with
liens prior to Agency\'s lien. Contact the County Supervisor immediately
if you are interested in this.

RD Instruction 1955-A

Exhibit E-1 to Subpart A

Page 3

\*(D) VOLUNTARY CONVEYANCE

You may convey all of your collateral to the Government. Contact the
County Supervisor immediately if you are interested in this.

\*\* (The above-described security instrument(s) provide(s) that the
United States may foreclose without Court action by selling the property
at public sale after \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. The
Government intends to sell the property in this manner.)

\*\*\*If you have not been advised of your rights to request deferral of
payments or other servicing options you should contact the County
Supervisor at the above-mentioned address within 15 days of the receipt
of this notice.

If you fail to comply with the requirements outlined in this notice
within the next 30 days, the United States plans to proceed with
foreclosure/liquidation.

YOU DO NOT HAVE ANY RIGHT TO APPEAL THIS DECISION TO ACCELERATE YOUR
AGENCY DEBT(S) TO ANY OFFICIAL OF THE AGENCY.

UNITED STATES OF AMERICA

BY \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

District Director

\[insert Agency name here\]

United States Department of

Agriculture

\* \[This will be included as an option only if it would be in the
Government\'s financial interest to accept a voluntary conveyance
offer.\]

\*\* \[This paragraph will be omitted in States with judicial
foreclosure or if it conflicts with State law.\]

\*\*\* \[This paragraph will be omitted when accelerating accounts for
failure to graduate or accelerating accounts of Non-program loan
debtors.\]

## o0o

(12-16-92) PN 196

**Note to Agency Official**:

This Exhibit should be used

when required by Instruction.

RD Instruction 1955-A

Exhibit F

Page 1

NOTICE ADVISING OF POTENTIAL FOR REFERRAL TO TREASURY FOR

CROSS-SERVICING AND THE AVAILABILITY OF DEBT SETTLEMENT

Dear (Borrower's Name):

Farm Service Agency (FSA) records show that you owe debt totaling
\$\_\_\_\_\_\_\_\_\_\_ with daily interest accrual of
\$\_\_\_\_\_\_\_\_\_\_. In accordance with the Debt Collection Act, 31
U.S.C. Chapter 37, FSA is prepared to refer your debt to the U.S.
Department of Treasury (Treasury) for collection through
cross-servicing. Referral of debt to Treasury for cross-servicing is not
an appealable action. If your debt is referred for cross-servicing,
Treasury may:

1.  take action to collect the debt by offset or garnishment, including
    offset of tax refunds and garnishment of salary,

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1.  refer the debt to a private collection agency for collection, or

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1.  refer the debt for collection by the U.S. Department of Justice.

Collection fees may be charged to you when collections are made. In
addition, FSA will report the debt to a credit bureau.

FSA will refer your debt for cross-servicing unless you submit Form\
FSA 1956-1, "Application for Settlement of Indebtedness", to this office
within 30 days from the date of this letter. A copy of this form is
included. All statements made on this document must be accurate and will
be subject to verification.

FSA has several programs which could allow you to settle the remaining
debt for less than the total amount due. You must be unable to pay your
FSA debt in full. All programs are subject to the discretion of the
Agency and are not a matter of entitlement or right.

(11-10-99) PN 312

RD Instruction 1955-A

Exhibit F

Page 2

Available Programs

1\) Compromise Offer A lump-sum payment of less than the total debt
owed.

2\) Adjustment Offer A series of payments of less than the total debt
owed paid over a maximum of five years.

3\) Cancellation The final settlement of a debt without any payment. FSA
must verify that there is no income or other assets from which the
Government can collect. You must be unable to pay any part of the debt
now or in the future.

> NOTE: FSA will not finance a compromise or adjustment offer.

If you submit a debt settlement application within 30 days of the date
of this letter, and the application is rejected, your account will be
referred to Treasury for cross-servicing after all appeal rights on the
debt settlement application are exhausted. After your account is
referred to Treasury, any debt settlement offer must be submitted to
Treasury, or its contracted private collection agency. If Treasury
refers your account to the Department of Justice for collection, your
offer must be made to the Department of Justice.

> If you have any questions about this notice, please contact this
> office at (local office phone number).

Sincerely,

(Agency Official)

oOo

RD Instruction 1955-A

Exhibit G

Page 1

## WORKSHEET FOR ACCEPTING A VOLUNTARY CONVEYANCE OF FARM LOAN PROGRAMS 

## SECURITY PROPERTY INTO INVENTORY

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

(present owner/borrower)

Refer to Exhibit I in FSA Transferred Instruction 1951-S for guidance in
estimating the incomes and expenses to use in this exhibit. The holding
period to be used is 165 days (5.5 months).

1\. MARKET VALUE OF PROPERTY \$
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Part 7, Form FSA 1922-1)

ESTIMATED HOLDING PERIOD IN YEARS
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. INCOME

Holding

a\. Annual Rent \_\_\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Holding

b\. Annual Royalties \_\_\_\_ x Period \_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_\_\_

c\. Other Annual Holding

Income \_\_\_\_\_\_\_\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_\_

d\. Annual % Holding

Land Appreciation \_\_\_ x Period \_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_\_

e\. Value gained due to restrictions that are placed on the

farm such as Conservation Easements, Conservation Reserve

Program (CRP), etc.

= \_\_\_\_\_\_\_\_\_\_\_\_\_

Holding

f\. Other (describe) \_\_\_\_\_x Period \_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_\_

TOTAL ADDITIONS = \$\_\_\_\_\_\_\_\_\_\_\_\_

3\. EXPENSES

a\. Total Prior Lienholder Indebtedness (P and I) = \_\_\_\_\_\_

b\. Other Acquisitions Costs (taxes presently owed, closing costs,

survey costs, administrative costs, junior liens, etc.) List:

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

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_\_

(09-10-03) PN 363

RD Instruction 1955-A

Exhibit G

Page 2

c\. Annual Taxes Holding

& Assessment \_\_\_\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_

d\. Annual Building Holding

Depreciation \_\_\_\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_

e\. Annual Holding

Management Costs\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_

f\. Total Essential Repairs to Secure & Resell = \_\_\_\_\_\_\_\_\_\_\_

g\. Annual % Decrease Holding

In Land Value \_\_\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_

(if applicable)

h\. Total Anticipated Resale Expenses (Commissions, Advertising, etc.)

= \_\_\_\_\_\_\_\_\_\_\_

i\. Total Interest Cost

MKT Value Regular Holding

\$ \_\_\_\_\_\_\_\_\_\_ x OL Rate\_\_\_\_\_\_\_\_\_\_\_ x Period =
\_\_\_\_\_\_\_\_\_\_\_

j\. Value loss due to restrictions that are placed on the farm such as

Conservation Easements, Conservation Reserve Program (CRP), etc.

= \$ \_\_\_\_\_\_\_\_\_\_

k\. Hazardous Waste Clean-up Costs = \_\_\_\_\_\_\_\_\_\_\_\_

TOTAL DEDUCTIONS (ITEMS A THROUGH K) = \_\_\_\_\_\_\_\_\_\_\_\_

4\. RECOVERY VALUE END OF HOLDING PERIOD

1\. \_\_\_\_\_\_\_\_\_ + 2. \_\_\_\_\_\_\_\_\_ - 3. \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

Market Total Total Recovery

Value Additions Deductions Value

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

Agency Official Date

Concurrence by: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_

State Executive Director Date

## o0o 

RD Instruction 1955-A

Exhibit G-1

Page 1

## WORKSHEET FOR DETERMINING FARM LOAN PROGRAMS MAXIMUM

## BID ON REAL ESTATE PROPERTY

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

(present owner/borrower)

Refer to Exhibit I in FSA Transferred Instruction 1951-S for guidance in
estimating the incomes and expenses to be used in this exhibit. The
holding period to be used is 165 days (5.5 months).

1\. MARKET VALUE OF PROPERTY \$
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

(Part 7, Form FSA 1922-1)

ESTIMATED HOLDING PERIOD IN YEARS
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

2\. INCOME

Holding

a\. Annual Rent \_\_\_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

Holding

b\. Annual Royalties\_\_\_\_\_\_x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

c\. Other Annual Holding

Income \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_x Period\_\_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

d\. Annual % Holding

Land Appreciation \_\_\_\_x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

e\. Value gained due to restrictions that are placed on the

farm such as Conservation Easements, Conservation Reserve

Program (CRP), etc. = \$\_\_\_\_\_\_\_\_\_\_\_

Holding

f\. Other (describe) \_\_\_\_\_x Period \_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

TOTAL ADDITIONS = \$\_\_\_\_\_\_\_\_\_\_\_

(09-10-03) PN 363

RD Instruction 1955-A

Exhibit G-1

Page 2

3\. EXPENSES

a\. Total Prior Lienholder Indebtedness (P and I) = \_\_\_\_\_\_

b\. Other Acquisitions Costs (taxes presently owed, closing costs,

survey costs, administrative costs, etc.) List:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

c\. Annual Taxes Holding

& Assessment \_\_\_\_\_\_\_\_\_x Period \_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

d\. Annual Building Holding

Depreciation \_\_\_\_\_\_\_\_\_x Period\_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

e\. Annual Holding

Management Costs\_\_\_\_\_\_x Period\_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

f\. Total Essential Repairs to Secure & Resell = \_\_\_\_\_\_\_\_\_

g\. Annual % Decrease Holding

in Land Value \_\_\_\_\_\_\_ x Period \_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

(if applicable)

h\. Total Anticipated Resale Expenses (Commissions,

Advertising, etc.) = \_\_\_\_\_\_\_\_\_\_

i\. Total Interest Cost

MKT Value Regular Holding

\$ \_\_\_\_\_\_\_\_\_\_\_\_ x OL Rate\_\_\_\_\_\_ x Period \_\_\_\_\_\_
=\_\_\_\_\_\_\_

j\. Value loss due to restrictions that are placed on the

farm such as Conservation Easements, Conservation Reserve

Program (CRP), etc. = \$ \_\_\_\_\_\_\_\_\_\_\_\_

k\. Hazardous Waste Clean-up Costs = \_\_\_\_\_\_\_\_\_\_\_\_\_\_

TOTAL DEDUCTIONS (ITEMS A THROUGH K) = \_\_\_\_\_\_\_\_\_\_\_\_\_\_

RD Instruction 1955-A

Exhibit G-1

Page 3

4\. BID WILL BE THE LESSER OF:

a\. 1. \_\_\_\_\_\_\_\_\_\_ + 2.\_\_\_\_\_\_\_\_\_ -
3.\_\_\_\_\_\_\_\_\_ = \_\_\_\_\_\_\_\_\_\_\_\_\_

Market Total Total Total

Value Additions Deductions

or,

b\. \_\_\_\_\_\_\_\_\_\_\_\_ + \_\_\_\_\_\_\_\_\_\_\_\_ =
\_\_\_\_\_\_\_\_\_\_\_\_

Unpaid FSA Prior Liens Total

Balance on

Secured Debt

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

Agency Official Date

Concurrence by: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

State Executive Director Date

## o0o

(09-10-03) PN 363

RD Instruction 1955-A

Exhibit J

## Release of a Junior Lien on HUD/Rural Development Joint SFH Security

[BACKGROUND]{.underline}

On August 23, 1991, Rural Development entered into a Memorandum of
Understanding with the Department of Housing and Urban Development (HUD)
regarding the release of a junior lien held by one agency when the other
forecloses a prior lien or accepts a deed in lieu of foreclosure.

[WHEN Rural Development IS THE SENIOR LIENHOLDER]{.underline}

When Rural Development requires release of a HUD junior lien to
foreclose or accept a deed in lieu of foreclosure, the State Director
submits the request to the National Office, Attention: Single Family
Housing, Servicing and Property Management (SFH/SPM) Division, with the
following documentation:

1\. A copy of Rural Development\'s mortgage or deed of trust.

2\. A title opinion indicating Rural Development holds a valid first
lien.

3\. A copy of a current appraisal.

4\. The State Director\'s estimate of the junior lien\'s value.

5\. If applicable, a copy of the deed which will transfer ownership to
Rural Development.

For a valueless lien, the National Office obtains HUD\'s release and
returns it to the State Director for recordation. For a partially
secured lien when Rural Development will foreclose, the National Office
obtains HUD\'s agreement to be named in Rural Development\'s foreclosure
suit allowing proceeds to be distributed by lien priority. The State
Director will be advised of the disposition of the request.

[WHEN HUD IS THE SENIOR LIENHOLDER]{.underline}

A field office which receives a request from HUD to release a junior
Rural Development lien forwards it through the State Director, to the
National Office, Attention: SFH/SPM Division, with the following
documentation:

1\. The appropriate release form.

2\. The State Director\'s estimate of the junior lien\'s value.

3\. A copy of HUD\'s mortgage or deed of trust.

4\. A copy of a current appraisal, either by HUD or Rural Development.

5\. If applicable, a copy of the deed transferring ownership to HUD.

6\. A title opinion indicating HUD holds a valid first lien.

7\. A letter or memorandum from HUD indicating the current unpaid
balance of the loan(s) secured by the HUD senior lien.

(11-24-93) PN 215

RD Instruction 1955-A

Exhibit J

Page 2

For a valueless lien, the National Office will execute the release. For
a partially secured lien when HUD will accept a deed in lieu of
foreclosure, the National Office will negotiate a settlement amount for
a release. For a partially secured lien when HUD will foreclose, the
National Office will agree to be named in HUD\'s foreclosure suit
allowing proceeds to be distributed by lien priority. The State Director
will be advised of the disposition of HUD\'s request.

oOo