HB-1-3550

13.1 INTRODUCTION

This chapter provides guidance about the role of Field Staff in servicing loans that are 

under the jurisdiction of the Servicing and Asset Management Office (Servicing Office) and the 

liquidation process after a loan has been accelerated. Servicing is mostly the role of the Servicing 

Office; however, Field Staff participation is important to maintain quality customer service and 

to protect the Government’s interest.

Whenever local assistance is needed to support a Servicing Office servicing action, the 

Servicing Office will request Field Staff support through the LoanServ work queue or via 

phone. These requests will provide direction about the work to be accomplished. Appendix 13 

contains a Field Office Reference Guide with helpful information on working effectively with 

the Servicing Office.

Several servicing functions have been permanently assigned to Field Staff. These include 

certain borrower actions requiring approval, assessing the borrower’s ability to refinance with 

private credit, managing Real Estate Owned (REO) and custodial property, the disposition of 

REO property, and providing satisfactions when loans are paid off. Borrower actions requiring 

approval and loan satisfactions are discussed in this chapter. The remaining functions are 

described in detail in the chapters that follow.

Section 1 of this chapter describes servicing actions in which the Servicing Office may 

request assistance from Field Staff. This servicing action is the responsibility of the Servicing 

Office; however, assistance may be needed from the Field so that the Servicing Office can 

adequately service the loan.

Section 2 deals with servicing actions which are the responsibility of Field Staff with 

Field Staff making the final decision. Section 3 involves liquidation responsibilities after the 

Servicing Office accelerates a loan.

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CHAPTER 13: SERVICING AND LIQUIDATION 

FUNCTIONS

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN 
4

HB-1-3550

13.2 TRANSITION TO THE SERVICING OFFICE

New borrowers know the Agency only through the Field Staff they have dealt with 

directly during the loan approval process. After loan closing, those borrowers must make the 

transition to dealing with the Servicing Office. Field Staff can help borrowers with this transition 

by discussing the post-closing role of the Servicing Office with the applicant throughout the 

origination process, and emphasizing, during the applicant orientation, the importance of dealing 

directly with the Servicing Office. Once the loan is closed, the Servicing Office will contact the 

borrower in writing before the first billing statement to explain its role as servicer.

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HB-1-3550

SECTION 1: WORKING WITH THE SERVICING OFFICE

13.3 REGULAR SERVICING

A. Newly-Activated Borrower Account

When the Servicing Office receives a new borrower’s loan docket, it will be reviewed to 

ensure that the documents are correct, and that the information contained in the legal documents 

matches the information that has been entered into LoanServ. 

This will provide a check on the accuracy of all data entry, as well as offering an 

opportunity to identify and correct clerical errors that could otherwise result in unauthorized 

assistance. When the Servicing Office encounters apparent discrepancies, Field Staff may be 

asked to assist in correcting problems. 

B. Payments

Field Staff should help borrowers understand the importance of dealing directly with the 

Servicing Office, while still providing appropriate levels of assistance. If a borrower brings a 

payment to the Field Office, Field Staff should remind the borrower that payments must be sent 

to the lockbox. Field Staff can forward a payment to the lockbox on the borrower’s behalf; 

however, the borrower should be advised that bringing the payment to the Field Office will only 

delay arrival at the correct destination, and the borrower will be more likely to incur a late fee 

than if the payment is sent directly. Late fees are set at 4 percent of the borrower’s scheduled 

payment for principal and interest and are assessed if the scheduled payment is more than 15 

days past due.

Fees on payments accepted by the Field Office will be recorded on Form RD 1951-49, 

“Register of Collections,” and will be safeguarded in accordance with RD Instruction 1951-B 

and Form RD 1951-44, “Management Control and Review of Field Office Collection Activities, 

and related Forms Manual Insert.

C. Approval Actions 

The Servicing Office must approve a variety of actions borrowers may wish to take 

during the course of their loans, including leasing mineral rights, obtaining a partial release of 

security, transferring title to someone who will assume the indebtedness, and obtaining Agency 

consent to temporarily not occupy the property or subordinate the Agency loan. In some 

circumstances, these actions may require on-site expertise.

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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN 
4 

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HB-1-3550

Paragraph 13.3 Regular Servicing

If the borrower requests a partial release of security or authorization to lease mineral 

rights, Field Staff may be asked to examine the site to determine whether the proposed action 

will have an adverse effect on the security property. A local perspective may be particularly 

useful, for example, if Field Staff are familiar with nearby properties that have experienced 

similar mineral activity.

The Servicing Office is responsible for most subordination requests and may request 

assistance from the Field Office. The Field Office may approve a subordination in the case of a 

borrower who is obtaining private credit for repairs to the security property, and the lender 

requires a prior lien.

In accordance with RD Instruction 1970-A, 1970.8 (e), “servicing actions are directly 

related to financial assistance already provided, do not require separate NEPA review, and are 

not actions for the purposes of this part”. 

D. Appraisals 

Field Staff may be asked to conduct appraisals for the Servicing Office. In these cases, 

Field Staff also are responsible for conducting administrative and technical reviews of these 

appraisals.

Section 5 of Chapter 5 provides detailed guidance on conducting appraisals. All appraisals 

done as part of a servicing action must include the appropriate level of due diligence, which 

includes completing Attachment 5-B.

E. Insurance Claims

Borrowers with insurance claims must contact the Servicing Office to establish a plan 

to repair or rehabilitate the security property. If the insurance claim proceeds will not be used 

to redevelop the security property, the amount received must be applied to the account. The 

responsibilities placed upon the Field Staff and the Servicing Office in the administering of an 

insurance claim fall within one of the following three categories, which consider the amount of 

the insurance claim, the repair or rehab cost and the risk to the government: 

 

• Total claim of $7,500 or less and the borrower’s account is current: Field Staff 

endorses the check to the borrower after reviewing the adjuster’s worksheet. 

• Total claim exceeding $7,500 but less than $30,000 or claims of $7,500 or less and 

the borrower’s account is not current: Field Staff forwards insurance proceedsto

the Servicing Office’s insurance escrow, and inspects the work as requested by the 

Servicing Office. Field Staff should contact the SFH Assistance Section at 314-457-

5200 for further guidance. 
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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

HB-1-3550

Paragraph 13.3 Regular Servicing

• Total claim of more than $30,000: Field Staff establishes a supervised bank account or 

forwards insurance proceeds to the Servicing Office’s escrow. The Field Staff also 

manages all steps of construction planning and performance in the same manner they 

would development funded by loan proceeds following the standards contained in RD 

Instruction 1924-A. Work is inspected prior to any disbursements. 

For construction contracts exceeding $10,000, Department of Labor requirements also 

apply. 

1. Administering Insurance Proceeds

In cases where the amount of the insurance loss claim check is $7,500 or less and the 

account is current, Field Offices are authorized to endorse insurance claim checks without 

recourse provided the borrower provides a copy of the adjuster’s worksheet and documentation 

that repairs will be made or has been completed. If the borrower does not have this 

documentation, the Field Office will contact the SFH Assistance Section at 1-314-457-5200 

for further guidance. Field Offices should first review the adjuster’s worksheet to ensure that 

the check is the total claim disbursement.

When Field Offices have endorsed an insurance check for $7,500 or less, they will cue 

the Servicing Office utilizing Task 285 and provide the claim check amount and date of the 

loss. If a borrower notifies a Field Office of an uninsured loss, the Field Office will cue the 

Servicing Office utilizing Task 285 and provide the estimated amount of damage to the property 

and the date of loss. 

The Servicing Office may force place insurance and submit a claim to the carrier. The Servicing 

Office will cue the Field Office if further actions are needed at the Field Office level.

For significant rehabilitation (a total claim of more than $30,000) all development will 

be completed under the supervision of the local Field Office. The insurance proceeds may be 

provided to the Field Office to establish a supervised bank account or retained for disbursement 

at the Servicing Office. Development will be managed by the Field Office in a like manner as 

development funded by loan proceeds. This should include Form RD 1924-2, Description of 

Materials, and Form RD 1924-25, Plan Certification, or a building permit issued by the local 

jurisdiction. All repairs and replacements will be planned, performed, inspected, and paid for in 

accordance with RD Instruction 1924-A. Payment schedules will be established in the 

individual repair plan. 
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HB-1-3550

Paragraph 13.3 Regular Servicing

Written contracts, using Form RD 1924-6, Construction Contract, are strongly 

recommended for all rehabilitation-related construction, and are required if there is 

construction involved that would affect the dwelling’s structural integrity. Otherwise, Form 

RD-1924-1, Development Plan, or similar form, with cost estimates and specifications, may be 

used. Unless the borrower method is used, funds will not be advanced for materials or other 

purposes until work is completed.

2. Inspecting Repairs and Authorizing Payments

As noted above, all repairs and replacements will be planned, performed, inspected, and 

paid for in accordance with RD Instruction 1924-A. Section 6 of Chapter 5 further provides 

guidance regarding how inspections should be conducted and documented. Payment schedules 

will be established in the individual repair plan and the construction contract (if applicable).

When the insurance loss claim is under the purview of the Servicing Office, Field Offices 

will be asked to inspect the repair work and complete Form RD 1924-12, Inspection Report. 

Before each inspection related to a progress payment, Field Staff should request a check from the 

Servicing Office. The check should be made payable to the borrower and the contractor. If work 

has been satisfactorily completed, Field Staff will instruct the borrower to endorse the check and 

give it to the contractor. If the inspection reveals that the work was not completed satisfactorily,

Field Staff will void the check and return it to the Servicing Office. After each periodic 

inspection, Field Staff will send the inspection report to the Servicing Office and maintain a 

copy in the borrower’s case file. Field Staff will follow up on the adjustment of all losses until 

satisfactory settlement has been made.

When all work has been satisfactorily completed, Field Staff will release the final check 

to the borrower and submit to the Servicing Office all documents required in RD Instruction 

1924-A, including: a final Form RD 1924-12, Inspection Report; Form RD 1924-9, Certificate 

of Contractor’s Release; Form RD 1924-10, Release By Claimants; and Form RD 1924-19, 

Builder’s Warranty.
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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

HB-1-3550

Paragraph 13.3 Regular Servicing

Exhibit 13-1

Administration of Insurance Proceeds when 

Redevelopment Work is to be Performed

Total Claims Account Status Rehab Components Insurance Claims 

Administration 

Procedure

$7,500 or less Current Not considered Field Staff endorses check 

to borrower after 

reviewing the adjuster’s 

worksheet.

$7,500 or less Not current Not considered Field Staff forwards 

insurance proceeds to 

the Servicing Office’s 

insurance escrow, and 

inspects the work as 

requested by the 

Servicing Office.

More than $7,500 but less 

than $30,000

All accounts regardless of 

status

Single component

More than $7,500 but 

less than $30,000

All accounts 

regardless of 

status

More than one 

component

Field Staff establishes a 

supervised bank 

account or forwards 

insurance proceeds to 

the Servicing Office’s 

escrow, and manages 

all steps of construction 

planning and 

performance in a like 

manner as development 

funded by loan 

proceeds. Work is 

inspected work prior to 

any disbursements.

More than $30,000 All accounts 

regardless of 

status

All rehab work
13-8

4 

HB-1-3550

Paragraph 13.3 Regular Servicing

F. Reamortizations and Other Documents Requiring Borrower Signature

Certain servicing actions may require that a borrower sign a loan document which is 

imperative to continue servicing the loan. Most times, the Servicing Office will mail such 

documents to the borrower. In some cases, especially when the document will remain in the 

Field Office, executing the document locally makes better sense. In these cases, the Servicing 

Office will advise the borrower to call and make an appointment with the local Field Office to 

sign the documents. 

The Servicing Office will also notify the Field Office and will provide specific instructions on 

what actions must be taken. For example, when a loan is reamortized, the borrower must 

execute Form RD 3550-18, Reamortization Agreement. The Servicing Office will prepare the 

form and contact both the borrower and Field Office with instructions on executing this form. 

Since the form modifies some terms of the promissory note, upon execution, the Field Office 

would file Form RD 3550- 18 with the borrower’s original promissory note, provide a copy to 

the borrower, and notify the Servicing Office that the borrower has executed the document. 

For reamortizations, the Field Office will type the following statement below the 

signatures on the original note or assumption agreement: 

“A Reamortization Agreement dated in the principal sum of $ 

has been given to modify the payment schedule of this note.” 

G. Payoffs 

Generally, a request for a loan payoff balance is made directly to the Servicing Office. In 

certain cases, Field or State Offices may need to obtain a payoff statement on a borrower’s 

account. When needed, Field /State Offices should submit Attachment 13-A, Request for Payoff 

Statement, to the Payoff Unit at the Servicing Office. If the payoff statement is to be used for 

internal purposes only, the documentation for determining market value, capital improvements, 

and closing costs should be maintained in the Field State Office. If the payoff statement is to be 

provided to a third party, all documentation should be faxed to the Servicing Office along with 

the attachment.

Attachment 13-A along with supporting documentation must be reviewed by a person 

other than the Rural Development employee making the request. The reviewer should be the 

first line supervisor, or designee, of the Rural Development employee making the request. The 

name and initials of the person making the request and the reviewer must be on the attachment.
HB-1-3550

Paragraph 13.3 Regular Servicing

H. Final Payments and Satisfactions

When a borrower makes a final payment, the Servicing Office will notify the Field 

Office. Since the methods and forms for releasing security instruments vary by State, the Field 

Office is responsible for preparing the necessary satisfaction or other release documents. When 

the account is fully satisfied, including any subsidy recapture, the Field Office will submit these 

documents to the borrower, along with the satisfied note and mortgage, unless requested to 

submit them to another lender or closing agent, as appropriate. In States where the security 

instruments are not released when the borrower refinances their debt (including an Agency 

refinance as a special servicing action), but are assigned to the new lender, Field Staff may 

execute the necessary documents to authorize the assignment. The borrower’s case file must be 

retained for 1 full fiscal year after the account is satisfied.

In cases where the account is not fully satisfied, such as in the case of a borrower who 

has elected to defer the repayment of recapture, the security instruments are not released. In 

these cases, the Servicing Office may advise the Field Office to prepare a subordination of the 

security instruments. Field Offices need to follow the Servicing Office instructions carefully to 

ensure that the correct documents are executed when releasing any security. Satisfaction 

documents are never sent to a borrower who has deferred payment of recapture until the 

recapture amount is paid in full.

I. Recapture Receivable Accounts

Delinquent tax notices/pending tax sale notices from taxing authorities on recapture 

receivable accounts should be forwarded to the Tax Unit at the Servicing Office for handling. 

The notices can be faxed to (314) 457-4535. Upon receipt of a notice of pending tax sale, the 

Servicing Office will review the recapture receivable account to determine if it is in the best 

interest of the Agency to pay the taxes to avoid the tax sale and protect the Government’s 

interest in the property. The Servicing Office may request assistance from the Field Staff when 

making this decision. A visit to the property may be necessary to determine the condition of 

the property and an estimated market value. If the taxes are paid the Servicing Office will 

demand payment from the borrower. If payment is not made a foreclosure action will pursue.

13.4 SPECIAL SERVICING ACTIONS

A. Borrower Counseling

If a borrower notifies Field Staff that there may be a problem with loan repayment, Field 

Staff must not offer special servicing options or counsel the borrower about specific alternatives. 

Instead, Field Staff should help the borrower place a call to the Servicing Office to obtain this 

type of assistance.

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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN
13-10

4

HB-1-3550

Paragraph 13.4 Special Servicing Actions

It is important for Field Staff to understand the servicing tools available to the Servicing 

Office in order to be able to refer borrowers most effectively. However, it is the responsibility 

of the Servicing Office to provide specific information and counseling to borrowers. Field Staff 

must use extreme caution in providing information to borrowers, since detailed information 

about changes in servicing procedures will be disseminated primarily at the Servicing Office.

The Rural Development portion of a leveraged/participation loan is eligible for the same 

servicing actions as Section 502 and 504 loans. However, servicing strategies may be different 

because of the Agency’s lien position and the need to coordinate servicing actions with the 

leveraged/participation lender.

The Servicing Office has the primary responsibility of servicing these accounts. On 

occasion, it may be necessary to request the Field Office to provide information on the 

leveraged/participation lender that is otherwise not available. Likewise, if the 

leveraged/participation lender contacts the Field Office regarding a specific account, they may 

wish to refer the lender to the Servicing Office for assistance.

B. Protective Advances

When the Servicing Office is contemplating a protective advance for physical repairs 

based on a borrower’s report that the property is in need of repairs, Field Staff may be asked 

to visit the property to determine whether the repair is actually needed, and whether the 

condition of the property warrants additional investment. The Servicing Office also may 

request that Field Staff conduct inspections of work completed with a protective advance.

Field Staff who notice significant damage or deterioration in a property that secures an 

Agency loan should report that information to the Servicing Office. The Servicing Office can 

then contact the borrower to discuss the condition of the property and determine whether 

additional action is warranted. Potential contamination from hazardous substances, hazardous 

wastes, or petroleum products should be reported promptly to the State Environmental 

Coordinator for further evaluation and guidance.

C. Refinancing

Borrowers with Agency nonprogram loans (nonprogram assumptions or credit sales), 

above-moderate loans, or initial Section 502 program loans with a term less than 25 years are not 

eligible for payment subsidy. If a borrower with one of these types of loans experiences 

difficulty, is in danger of losing the home, and it appears that the borrower would otherwise 

qualify for payment subsidy, Field Staff may be asked by the Servicing Office to consider 

refinancing the loan.
HB-1-3550

Paragraph 13.3 Regular Servicing

Agency debt, including subsidy recapture, may be refinanced as a special servicing action 

including, but not limited to, at the end of a moratorium. When an existing Agency loan is being 

refinanced as a special servicing action, the household’s adjusted income must not exceed the 

applicable moderate-income limit for the area at the time of loan approval and closing. The 

Agency may limit the number of direct loans made for refinancing purposes based on the 

availability of funds and Agency priorities.

D. Subsequent Loans

Originating subsequent loans is always the responsibility of Field Staff. However, there 

may be times when the Servicing Office becomes aware the borrower may need a subsequent 

loan and will refer the borrower to the Field Office.

E. Bankruptcies

If a borrower’s bankruptcy petition is received in the Field Office, it should be forwarded 

immediately to the Servicing Office.

F. Missing Borrowers

When the Servicing Office is unable to locate a borrower, Field Staff may be asked to 

use local connections in an effort to find them. This might include checking with neighbors or 

friends, contacting local utilities, or checking with area schools. If the borrower cannot be 

located, Field Staff may be asked to take custody of the property to protect the Government’s 

interest.

Procedures for managing custodial property are described in Chapter 15.

G. Payment Subsidy Renewals

Payment subsidy renewals are the responsibility of the Servicing Office. On occasion, it 

may be necessary to request that the Field Office make a personal contact with the borrower to 

assist with the payment subsidy renewal process. Personal contact by the field is necessary when 

the Servicing Office has not received required documentation from the borrower to renew the 

payment subsidy and the Servicing Office has been unable to make a personal contact. A 

personal contact is made when verbal communication is made with the borrower either by phone 

or through a face-to-face meeting or through written communication from the borrower.

The Servicing Office sends a renewal request to the borrower 90 days prior to the 

expiration date of the subsidy agreement. When the borrower fails to send the necessary 

paperwork to renew the subsidy, the Servicing Office attempts to contact the borrower by phone 

and mail. Approximately 45 days prior to the expiration of the current subsidy agreement, if the 

Servicing Office is unsuccessful in obtaining the required documentation, the Field Office will 

be requested through Task # 526 to contact the borrower. This task should be completed within 

30 days. When this task is received, the Field Office will make a personal contact with the 

borrower or determine that a personal contact is not necessary.

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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN
4

13-12

HB-1-3550

Paragraph 13.4 Special Servicing Actions

Within 30 days of receipt, the Field Office should close Task # 526 and clearly 

document the contact or reason why contact is not necessary through Task # 115 entering the 

“message” in the task or by using “GLOBAL NOTES.”

If the Field Office determines the borrower is not eligible for subsidy or no longer desires 

subsidy, close Task # 526 and clearly document in “GLOBAL NOTES” why the borrower does 

not want or qualify for payment subsidy. A personal contact is also not required if the property 

is abandoned. If the property is abandoned, close Task # 526 and respond to the Servicing 

Office with Task # 100.

A monthly report which provides information on Field Office tasks that were not 

completed is available in Hyperion. State Directors will be responsible for monitoring 

incomplete tasks within their state jurisdiction.
HB-1-3550

Paragraph 13.4 Special Servicing Actions

H. Preacceleration Personal Contact

To ensure that a personal contact has 

been made with a borrower prior to an 

acceleration, the Field Office may be requested 

to personally contact the borrower. Exhibit 

13-2 provides an overview of the Personal 

Service Review process. The Field Office will 

be requested to contact the borrower when the 

Servicing Office has been unable to make a 

personal contact with the borrower within the 

last 60 days and all required servicing letters 

have been sent, attempted phone contacts have 

been made, and monthly billing statements 

have been mailed to the borrower. A personal 

contact is made when verbal communication is 

reached with the borrower either by phone or 

through a face-to-face meeting or through 

written communication from the borrower.

Field offices may be able to obtain financial 

information which can be used to recommend 

actions to the Servicing Office such as 

reamortization, moratorium, debt settlement 

or acceleration.

In cases where the Servicing Office’s 

attempts to make a personal contact have been 

unsuccessful, the Field Office will be 

requested to contact the borrower using Task #

8. Field Offices should complete Task 8 within 

30 days. When Task # 8 is received, the Field 

Office must review the “DEL/LOAN/HISTORY” and “DIS/HISTORY” screens before contacting 

the borrower. Once the screen is displayed, tab to the “DSP” field and type the word “ALL.” This 

will provide information on all letters, calls, and notes. Prior to closing the task all contacts and 

attempts must be documented in “GLOBAL NOTES.” If it appears that additional servicing 

options are needed, the “Account Issue and Suggested Resolution Sheet” shown as Attachment 

13-B will be used to notify the Servicing Office that servicing assistance is needed.

13-13

Exhibit 13-2

Personal Service Review Process

Account Review

• Review for correct delinquency status and that 

all monies have been applied.

• Ensure that payment subsidy has been offered 

and that there are no outstanding documents.

• Ensure moratorium processing is not 

outstanding.

• Ensure a reamortization is not in process.

• Ensure the Servicing Office has no open 

research tasks.

Contact Review

• Determine if the Servicing Office has spoken 

to the customer since the account was 60 days 

past due and three attempts have been made

within the last 60 days.

Resolution

• A task or callback is requested to ensure the 

servicing needs of the customer have been 

met. If the Servicing Office cannot contact 

the customer, a task is opened to the Field 

to make a personal attempt.

• A Personal Contact will be made by the 

Servicing Office or the Field Office prior to 

referral for foreclosure.

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN
4

HB-1-3550

13-14

Paragraph 13.4 Special Servicing Actions

If the Field Office has attempted contacts (either by phone or mail) and left a message 

through a door hangar or a business card, the Servicing Office will be notified using Task # 18 

which will allow the borrower 15 days to make a call back to the Field Office or the Servicing 

Office. If after 15 days no attempt is made by the borrower to contact the Field Office or the 

Servicing Office, and the defaults have not been cured, the Servicing Office will direct the 

account to the acceleration unit.

If after reviewing the account the Field Office believes that personal contact is not 

necessary and the account should be accelerated, the Servicing Office will be tasked using Task 

# 17 to indicate the account has been reviewed and “Acceleration is necessary” and document 

why acceleration of the account is necessary, and a personal contact is not necessary by entering 

the “message” in the task or by using “GLOBAL NOTES.” An example of when personal 

contact is not necessary is when the security property has been abandoned. In abandonment cases 

the field will notify the Servicing Office using Task # 100.

A monthly report will be provided to State Directors showing the number of tasks not 

completed. State Directors will be responsible for monitoring incomplete tasks within their state 

jurisdiction.

13.5 VOLUNTARY SALE

Sale of security property is generally the most desirable option for both the Agency and a 

borrower who is unable to continue the loan. For the Agency, a sale to another party avoids the 

potential costs of liquidation, as well as costs related to owning and disposing of a property. For 

the borrower, it offers the best opportunity for being released from the debt without a major 

credit history blemish. A borrower may sell a property to a third party even after the account is 

accelerated. Field Offices may become aware of a borrower who desires to sell their property 

through notification from the Servicing Office or directly from the borrower. If the initial contact 

was not made through the Servicing Office, the Field Office should notify the Servicing Office

of the proposed sale. If it appears that the sale of the property may not pay the debt in full, the 

Field Office should provide the borrower with a Debt Settlement Packet.

If a borrower proposes to sell the property for an amount which may be insufficient to 

pay the Agency debt, prior liens, and authorized selling expenses, the Agency may consent to the 

sale when it is determined to be in the best interests of the Agency. For states included in the 

REO/foreclosure centralization, the Servicing Office may consent to the sale. In non-centralized 

states, the Field Office may consent to the sale. The Agency may also advance authorized selling 

expenses to facilitate the sale. To determine if the proposed sale is in the Agency’s best interest, 

a copy of the sales contract, appraisal, and sales expenses are needed. Another lender’s appraisal 

may be used if it meets Agency appraisal guidelines.
HB-1-3550

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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

Paragraph 13.5 Voluntary Sale

Whether the short sale request is 

approved for less than the debt or if the request 

is denied, the approving official should provide 

their decision in writing to the homeowner.

Handbook Letter 20 provides sample language 

for letters that may be used.

At a minimum, the approval letter 

should include the approved sale price, amount 

of net proceeds due to the Agency and a Debt 

Settlement Package with instructions to return

the completed package to the Servicing Office. The homeowner is to be made fully aware that 

while the Agency is agreeing to release the lien they are still responsible for any remaining 

debt, which can be settled through the debt settlement process.

The denial letter should state, at a minimum, that the Agency has reviewed the request for 

consent to sell the property for the proposed sale price and provide specific reasons why the 

Agency does not consent to the sale. The Field Office should be listed as the contact.

In cases where a junior lien exists, the State Director may approve settlement of a junior 

lien to effect sale of the property when it is determined to be in the Agency’s best interest. Field 

Staff will negotiate the lowest cost to have the junior lien released from the security property, 

bearing in mind the Agency only seeks to have the lien released (and not necessarily satisfied). 

The junior lienholder may still seek recovery from the debtor, if permitted by State law.

The Agency’s objective is to 

minimize any potential loss to the 

Government and to the borrower. The 

Agency may consent to a sale for as low as 

the market value of the property, minus the 

prior liens and authorized sales expenses. 

When the proposed sales price is less than the 

market value, a net recovery valuation is 

required. Either action is handled in the Field 

Office and the final decision to concur with

the proposed sale lies with a Loan Approval Official.

Authorized Selling Expenses

Authorized selling expenses are those which a seller 

customarily and legally pays to convey title and 

includes such items as a typical real estate 

commission, up to three points to enable the buyer 

to secure credit (but not to reduce the interest rate), 

real estate taxes, junior liens, deed preparation, 

abstract and title fees, termite and related 

inspections, title insurance, surveys, and deed and 

revenue stamps.

Example - Sale for Less Than Debt

A borrower’s debt is $30,000, the sales price of the 

property is $28,000, authorized sales expenses are

$3,000, and the market value is $28,000. In this case, 

the Loan Approval Official may consent to the proposed 

sale since it will net the Agency $25,000 ($28,000 

minus $3,000 in authorized selling expenses). If the 

proposed sales price was less than the market value 

($28,000), a net recovery valuation would be required.
4 

HB-1-3550

13-16

Debt Settlement

A Debt Settlement Package consists of:

• Form RD 3550-20, Application for 

Settlement of Indebtedness

• Form RD 3550-21, Payment Subsidy Renewal 

Certification

• Copies of last two months bank statements 

for all accounts 

• Verification of Income (last 2 pay 

stubs, benefit letter, etc.)

• Copy of most recent Federal Income 

Tax Return

• Copy of Net Recovery Worksheet, 

if applicable 

• Estimated selling expenses

• Any other relevant information

A Debt Settlement Package can be requested from 

the Servicing Office by utilizing Task 569 or 

assembled in the Field Office. For emergency 

releases on debt settlement cases, the above 

information may be faxed to the Special 

Assistance Section, ATTN: QR Debt Settlement, 

in the Servicing Office at (314) 457- 4451 or 

(314) 457-4551. Please ensure the borrower’s 

telephone number is provided. Non emergency 

cases should be sent to the aforementioned section 

in the Servicing Office.

Paragraph 13.5 Voluntary Sale

When sales proceeds will not fully satisfy the debt, the Servicing Office will make the 

determination of whether the borrower will be released from personal liability. This 

determination is based upon a Debt Settlement Package completed by the borrower and 

forwarded to the Servicing Office for review and approval. A completed Debt Settlement 

Package is required to be submitted at or before loan closing for all sales for less than the debt, 

and sales proceeds must be submitted by certified or cashier’s check. In cases where the 

borrower is not able or willing to complete the Debt Settlement Package, the Field Office may 

still release the mortgage when it is determined to be in the best interest of the Agency. This 

generally occurs when the borrower has moved out of the area or failure to close the loan will 

result in liquidation and the Agency receiving less than the anticipated net recovery value. The 

Debt Settlement Package, if available, and proceeds from the sale will be transmitted to the 

Cash Section of the Loan Administration Branch in the Servicing Office. Form RD 3550-17, 

Funds Transmittal Report, with the final 

payment coded “00” will be used to transmit 

the loan proceeds. 

The Field Office will enter in 

GLOBAL/NOTES the date of the sale or 

assumption, purchase price, outstanding 

vouchers, and the date funds were submitted 

to the Servicing Office. On accounts which 

were accelerated, the Field Office will also 

update the FCL/INFO screens with third 

party information. When proceeds have been 

posted or the assumption processed, the 

Servicing Office will notify the Field Office 

of such action through Task #86, “Approved 

short sale, release mortgage/deed only,” and 

will provide further guidance on release of 

the promissory note or debt settlement 

action, as appropriate.

13.6 DEBT SETTLEMENT

Debt settlement procedures are 

implemented when there are debts owed the 

Agency, including balances remaining on an 

account after liquidation, debt remaining after 

a sale, subsidy recapture receivable or grant 

repayment amounts due, or unauthorized 

assistance due. Debt settlement begins when
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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

Paragraph 13.6 Debt Settlement

the security has been disposed of. An account may be debt settled through compromise, 

adjustment, charge off, or cancellation.

The Servicing Office handles debt settlement, but Field Staff may be asked to assist in 

efforts such as locating missing borrowers or joint debtors or checking local records to identify a 

debtor’s assets. The Servicing Office will generally send the satisfaction to the Field Office with 

instructions to return the satisfaction and satisfied note to the debtor.

13.7 ADDITIONAL INPUT

Even when the Servicing Office has the 

primary responsibility for servicing, Field Staff 

have an obligation to report information that 

comes to their attention indicating risks to the 

security property or changes in borrower 

circumstances. Such items might include 

knowledge of hazardous dwelling conditions, environmental hazards, nonoccupancy, 

abandonment, or changes in income. Field Staff who learn of borrower difficulties also may 

recommend that the borrower contact the Servicing Office for assistance.

13-17

Using Personal Knowledge

Field Staff must consistently report 

information that comes to their attention if it is 

relevant to Agency loans or security properties 

to ensure that all borrowers are treated equally.
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13-18

SECTION 2: BORROWER ACTIONS REQUIRINGAPPROVAL

[7 CFR 3550.159]

13.8 OVERVIEW

A borrower must obtain approval from the Agency before taking actions that may affect 

the security value of the property. Since these actions involve security property, they are 

handled in Field Offices. Key actions that require approval from the Agency include 

subordination, lease of mineral rights, partial release of security, lease of security property, and 

assumption of indebtedness.

When the Servicing Office becomes aware of borrower actions requiring approval, they 

will cue the local Field Office and provide any necessary information to facilitate processing of 

the borrower’s request. Field Offices will approve or disapprove the actions outlined in this 

section and will cue the Servicing Office with the outcome.

This section first covers general guidelines and procedures for evaluating a borrower’s 

request for approval of an action, with the exception of assumptions of indebtedness. Specific 

guidelines for each of the actions, including assumptions, follow the discussion of general 

guidelines.

13.9 GENERAL GUIDELINES

A. Reviewing Requests

To request approval for subordination, mineral leases, partial release of security, and 

lease of security property, a borrower must submit Form RD 465-1, Application for Partial 

Release, Subordination, or Consent. If the information provided is not sufficient to allow for a 

thorough evaluation, the Field Office must request additional information from the borrower.

B. Obtaining an Appraisal and an Environmental Review

An appraisal is required for the Agency to subordinate its interests or to approve a partial 

release of security if the amount of consideration exceeds $5,000. The borrower must pay for the 

appraisal, although the cost for an appraisal can be charged to the borrower’s account.

An existing appraisal may be used if it is less than 1 year old and appears to reflect 

market value. An Agency appraisal is not required if a lender is involved and can provide an 

appraisal that adequately reflects market value.
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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

Paragraph 13.9 General Guidelines

Actions requiring Agency approval of mineral leases are subject to the environmental 

requirements of RD Instruction 1970 series “Environmental” prior to approval.

C. Evaluating and Approving the Request

Once the information needed to evaluate the request has been submitted, the Field Office 

must analyze the effect of the proposed action on the security property and document the 

conclusions on Form RD 465-1. Some factors to consider in the analysis include:

• The market value of the property before and after the transaction;

• The physical effects of the action on the security property; and

• The assignment of initial and subsequent payment proceeds.

If the analysis indicates that the Agency’s security will not be put at risk by the action, an 

approval official may sign Form RD 465-1. The Office of the General Counsel (OGC) or the 

State Office may need to provide relevant forms needed to complete the approval. Signed copies

of Form RD 465-1 should be distributed to the Servicing Office, the borrower, and the lender, as 

appropriate. The original should be maintained in the borrower’s case file at the Field Office.

D. Using Proceeds

Proceeds that arise from the sale of a portion of the security, granting an easement or 

right-of-way, damage compensation, and all similar transactions should be used in the following 

order.

• To pay customary and reasonable costs related to the transaction that must be paid by 

the borrower, such as:

◊ Real estate taxes that must be paid to conclude the transaction;

◊ Cost of title examination, survey, abstract, and reasonable attorney’s fees; and

◊ Costs necessary to determine a reasonable price, such as appraisal of minerals, 

when the necessary appraisal cannot be obtained without costs.

• To be applied on a prior lien debt, if any.

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13-20

Paragraph 13.9 General Guidelines

• To be applied to the Agency indebtedness or used for improvements to the security 

property in keeping with the purposes and limitations applicable for the use of 

Agency loan funds. Proposed development will be planned

and performed in accordance with RD Instruction 1924-A and supervised to ensure 

that the proceeds are used as planned.

The use of proceeds should be reflected on Form RD 465-1 and agreed to by the 

borrower and the Agency. Proceeds from the transaction to be applied to the Agency 

indebtedness will be remitted to the Cash Management Branch in the Servicing Office using 

Form RD3550- 17, Funds Transmittal Report, with Reason Code “00,” together with a brief 

statement as to the source of the proceeds, a copy of Form RD 465-1, and any related 

documentation. The Field Office will also notify the Servicing Office using Task 178, “Legal 

Description Correction.”

13.10 SUBORDINATION [7 CFR 3550.159(b)]

Subordinations are generally handled by the Servicing Office. The Field Office may 

approve a subordination of the Agency’s security interests to allow a borrower to obtain a 

subsequent loan with private credit to make needed repairs or improvements to the property.

A. Criteria for Subordination

Requests for subordination can be 

approved if:

• The other lender verifies that the 

funds will be used for Agencyeligible purposes;

• Based on repayment ratios, the prior lien debt will be on terms and conditions that the 

borrower can reasonably be expected to meet without jeopardizing repayment of the 

Agency indebtedness;

• Any proposed development will be planned and performed in accordance with 

Agency construction standards, as described in RD Instruction 1924-A or directed 

by the other lender in a manner that is consistent with that subpart; and

Nonprogram Borrowers

Subordination cannot be authorized for 

nonprogram loans.
HB-1-3550

Paragraph 13.10 Subordination [7 CFR 3550.159(b)]

• The prior lien holder agrees in writing to provide at least 30 days prior written notice 

to the Agency before initiating any foreclosure action on the prior lien.

To document that the subordination conforms to the Agency’s requirements, the borrower 

should ask the other lender to provide the Agency with a memorandum that states the purpose of 

the loan, along with its terms and conditions. 

B. Amount of Subordination

The maximum amount of subordination is the market value of the security property 

minus the unpaid balance of all Agency loans (exclusive of recapture). 

13.11 MINERAL LEASES [7 CFR 3550.159(a)] 

Borrowers must obtain Agency authorization before leasing mineral rights on their 

security property. Such requests are rare but do occur in situations such as a property in a town 

located above a coal mine or a property located on a water source. OGC should be involved in 

mineral lease decisions because State and local laws vary. In addition, an environmental review 

is required in accordance with RD Instruction 1970 series “Environmental”, prior to approval. 

Subordination of an Agency loan to a mineral lease does not entitle the leaseholder to any 

proceeds from the sale of the security property. If the lease of mineral rights is approved, rental 

proceeds not assigned to the Agency are treated as income and any payment subsidy must be 

adjusted accordingly. 

The Agency should consent to the lease of mineral rights and the subordination of its 

liens to the lessee’s rights and interests in the mineral activity if the security property will remain 

suitable as a residence, and the Government’s security interest will not be adversely affected.

To make this determination, the Agency must consider the effects of leasing on the 

security property including the potential for the lessee’s rights of surface entry on the property. 

The Agency also must ensure that the property remains decent, safe, and sanitary and the value 

of the security property is not decreased below the amount of the loan. 

• No decrease in value. If the proposal is not likely to decrease the value of the 

security property, the lease may be approved if the borrower agrees: (1) to use any 

damage compensation received from the lessee to repair damage to the site or 

dwelling; or (2) to assign it to the Agency to be applied to reduce principal.

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13-22

Paragraph 13.11 Mineral Leases

• Likely decrease in value. If the proposed activity is likely to decrease the value of 

the security property, the Agency should consent to the lease of mineral rights only if:

(1) the borrower assigns 100 percent of the lease income to the Agency to be applied 

to reduce principal; and (2) the rent to be paid is at least equal to the estimated 

decrease in market value.

When an assignment of income is required, the borrower must submit an assignment of 

income in a format that is designed to comply with State law and approved by OGC.

13.12 PARTIAL RELEASE OF SECURITY [7 CFR 3550.159(c)]

A borrower may request a partial release of security to accommodate a need to sell or 

exchange part of the property or grant a right-of-way across the security property. For example, 

the owner of an adjoining property may want to trade 10 feet of the side yard for 10 feet of the 

back yard, or the local government may wish to purchase land that borders a highway slated for 

widening.

The Agency may consent to transactions affecting the security and grant a partial release 

of security if the following conditions are met.

• The borrower will receive adequate compensation:

◊ The sale of any part of the security property must result in a payment equal to the 

value of the security being released or rights granted;

◊ The exchange of security property must result in another parcel of property 

acquired that has value equal to or greater than that being released; or

◊ The granting of an easement or right-of-way must result in benefits that are equal 

to or greater than the value of the security property beingreleased.

• The security property, after the transaction is completed, must be adequate, decent, 

safe, and sanitary. For a program loan, the security after the transaction is completed 

must also remain modest.

• Repayment of the Agency debt must not be jeopardized.
HB-1-3550

Paragraph 13.12 Partial Release of Security [7 CFR 3550.159(c)]

To process a partial release, the Field Office must complete the following actions.

• Complete any required State release forms. The unrecorded documents will be 

uploaded to the imaging repository as “Loan Documents Class – Deeds of Trust 

Mortgages” as part of the borrower’s permanent record. The party requesting a partial 

release is responsible for recording costs.

• For an exchange of all or a portion of the security property, obtain title clearance for 

the new security before the release of the existing security. Security instruments must 

be obtained for the new property. 

• For a sale of all or a portion of the security property, deliver the release when full 

payment is received.

• Update the legal descriptions of the property, as necessary.

The Field Office may approve, after notifying the Servicing Office of the approval, 

the following releases:

• Additional security. At any time prior to payment of the loan in full, the Agency 

may authorize a release from the Agency’s lien any real estate taken as additional 

security. This is authorized provided the market value of the remaining security is 

adequate to secure the loan balance. Additional security does not include any part of 

the tract purchased with Section 502 loan funds or part of the minimum adequate site 

on which the dwelling is located.

• Mutual Mistake. The Agency may authorize the release of property from the 

Agency’s lien caused through mutual mistake when substantiated by facts and when 

the Agency can determine, with the advice of OGC, that a mutual error existed at the 

time the property was included in the security instrument.

• No evidence of indebtedness. The Agency’s lien may be released in situations 

where there is no evidence of an existing secured indebtedness in the Field Office or 

in the Servicing Office. Before releasing the lien, the Field Office should consult 

with the SFH Assistance Section (fka Field Assistance Desk) in the Servicing 

Office. 

13-23

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN
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13-24

Paragraph 13.12 Partial Release of Security [7 CFR 3550.159(c)]

• Valueless Lien. In liquidation cases, if a net recovery valuation indicates the 

Agency’s lien is valueless (that is, there is no or a negative potential recovery), the 

lien may be released. The Field Office should immediately contact the SFH 

Assistance Section at the Servicing Office. This is necessary to ensure that taxes and 

insurance are no longer paid by the Agency, and a debt settlement package is sent to 

the borrower by the Servicing Office. 

13.13 LEASE OF SECURITY PROPERTY [7 CFR 3550.159(d)] 

Program borrowers must notify the Agency if they lease the property. If the Agency 

becomes aware of a borrower who is leasing their property, the borrower is not eligible for 

payment subsidy or special servicing benefits during the period of the lease. Field Offices will 

notify the Servicing Office and provide any applicable documentation. If they become aware 

that a borrower has leased the security property, the Agency also should assess the borrower’s 

ability to refinance with private credit. If the lease is for a term of more than 3 years or contains 

an option to purchase, the Agency may liquidate the loan. Nonprogram borrowers are free to 

lease their properties without restriction.

13.14 ASSUMPTION OF INDEBTEDNESS [7 CFR 3550.163] 

A. New Rates and TermsAssumptions

When purchasing a property currently financed by a Section 502 loan, the new borrower 

will typically receive new loan funds. However, new rates and terms assumptions must be used 

when funding is limited (e.g. in September as a fiscal year is coming to a close and in October 

when a new fiscal year begins). In limited funding situations, the debt is assumed on new rates 

and terms as part of loan origination and is addressed in other chapters of this Handbook. Field 

Offices are authorized to release the former borrower from personal liability for the amount of 

debt being assumed utilizing Form RD 3550-16, Release from Personal Liability. In cases where 

the debt is not being assumed in full, the Servicing Office will handle the settlement of the 

remaining debt and any release of liability for the portion of debt not being assumed. 

B. Same Rates and TermsAssumptions

In certain limited cases, generally those involving transfers of title between family 

members, a standard industry assumption is permitted. It is known in the Section 502 program 

as a same rates and terms assumption. Under this type of assumption, the existing note and 

terms, including the interest rate and the remaining repayment period, do not change. Same rates 

and terms assumptions are handled and approved in the Field Office. However, a recorded deed 

is required prior to submitting the account to the Servicing Office for processing. If the account 

is past due at the time an assumption is executed, the new borrower will be referred to the 

Servicing Office to resolve the delinquency. 

Same rates and terms assumptions are permitted for the following types of transfers:
HB-1-3550

Paragraph 13.14 Assumption of Indebtedness [7 CFR 3550.163]

• A transfer from the borrower to a spouse or children not resulting from the death of 

the borrower;

• A transfer to a relative, joint tenant, or tenant by the entirety resulting from the death 

of the borrower;

• A transfer to a spouse or ex-spouse resulting from a divorce decree, legal separation 

agreement, or property settlement agreement;

• A transfer to a person, other than a deceased borrower’s spouse, who wishes to 

assume the loan for the benefit of persons who were dependent on the deceased 

borrower at the time of death, if the dwelling will be occupied by and or more persons 

who were dependent on the borrower at the time of death and there is a reasonable 

prospect of repayment;

• A transfer into an inter vivos trust in which the borrower does not transfer rights of 

occupancy in the property; and

• Any subsequent transfer of title, except upon death of the inheritor or between 

inheritors to consolidate title, will be treated as a sale.

C. Agency Approval

The due-on-sale clause contained in all Agency mortgages stipulates that the borrower 

must obtain approval from the Agency before the title of a security property can be transferred 

with an assumption of the indebtedness. Prior approval is not required for same rates and terms 

assumptions or when financed using new loan funds. 

The Agency will approve a transfer of title and assumption of indebtedness if it is in the 

best interest of the Government. The new owner will be liable for the loan, and the terms and 

conditions of the assumption depend upon the eligibility of the new purchaser and the property’s 

characteristics.

Unauthorized assistance will not be pursued when an individual who is eligible for a 

same rates and terms assumption has been occupying the security property, receiving subsidy 

based on their household income and executes a same rates and terms assumption. As these cases 

are identified, the Servicing Office will notify the individuals occupying the security property in 

writing that unauthorized assistance will be pursued unless an assumption agreement is signed 

within 90 days.

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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN
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13-26

Paragraph 13.14 Assumption of Indebtedness [7 CFR 3550.163]

A task will be sent to the Field Office informing them of the unauthorized assistance and 

a request to have the individuals execute a same rates and terms assumption. If the assumption is 

not executed within 90 days and the Field Office has not requested an extension to complete the 

processing of the assumption, collection of the unauthorized assistance will be pursued.

The new owner need not have a low or moderate income. However, payment subsidy 

can be continued for the new owner only if he or she is eligible for assistance and only at the 

level for which the new household qualifies. If the transferee is a very low- or low-income 

person, it may be more beneficial for the transferee to assume the loan under new rates and 

terms. For example, if current interest rates are lower or a longer repayment period is necessary, 

a new rates and terms assumption may be of benefit to the new owner. In those cases, if the new 

owner applies and is program-eligible, the loan will be assumed under new rates and terms or 

financed with new loan funds. In cases where the assuming party has a moderate- or above 

moderate-income, the party will be informed of the Agency’s refinancing requirements, and if 

applicable, the loan will be reviewed for refinancing.

In most cases, if the borrower sells a security property with a due-on-sale clause without 

obtaining prior authorization from the Agency, the assumption will not be approved, and the 

loan may be liquidated. If the Agency determines it is in the best interest of the Government to 

continue the loan, the account will be serviced in the original borrower’s name, and the original 

borrower will remain liable for the loan under the terms of the security instrument.

A new owner who obtains property through a transaction eligible for a same rates and 

terms assumption is not required to obtain Agency approval or assume the loan. The Agency is 

not permitted to liquidate the loan if the new owner continues to make scheduled payments and 

meets all other obligations of the loan. However, a new owner who does not assume the loan is 

not eligible for payment assistance or a moratorium.

D. Procedural Requirements

The new owner must sign Form RD 3550-22, Assumption Agreement - Single Family 

Housing. For assumptions, the original note is not returned to the seller. Instead, the note is 

filed with other original notes, with the original Form RD 3550-22 attached.

E. Releasing a Departing Borrower from Liability

Changes in household composition may trigger the need to adjust who is responsible for 

repayment of the loan. The need for a change most often occurs when one party to the note 

wishes to be released of liability. For example, after a divorce the departing spouse may wish to 

be relieved of responsibility for the balance of the mortgage. The Agency will authorize such a 

release only when:
HB-1-3550

Paragraph 13.14 Assumption of Indebtedness [7 CFR 3550.163]

• The divorce decree or property settlement document did not make the departing 

borrower responsible for loan payments;

• The departing borrower’s interest in the security property is conveyed to the person 

with whom the loan will be continued; and

• The remaining borrower meets the maximum total debt ratio requirements and credit 

history requirements.

Form RD 3550-16 is used to release the departing borrower from liability. The Servicing

Office generally handles these releases but may cue the Field Office for assistance.

The following items need to be submitted to apply for a release of liability:

1. A written request from the departing borrower to be released of liability;

2. New address and phone number of the departing borrower;

3. Divorce decree and property settlement, as applicable;

4. Prepared and/or filed quit claim deed;

5. Financial statement of remaining borrower;

6. Verification of Employment/Income for remaining borrower; and

7. Copy of latest Federal income tax return, including W2 form, for remaining borrower.

13.15 PROTECTIVE ADVANCES [7 CFR 3550.206]

The Agency may advance funds to pay for fees and services that are needed to protect the 

Government’s interest in either program or nonprogram property. Protective advances are only 

considered when the Agency cannot provide a subsequent loan for such purpose to the borrower. 

This could occur because the borrower does not meet current eligibility standards, lack of funds, 

or unwillingness of the borrower to cooperate. The Agency recovers the amounts advanced by 

charging the borrower’s account. Amounts advanced are due with the next scheduled payment. 

If the borrower is unable to repay the advance in a lump sum, the Field Office may request that 

the Servicing Office schedule repayment consistent with the borrower’s ability to pay or 

reamortize the loan.

A. Advances for Property Repairs

Protective advances for property repairs are made only to protect the Government’s 

interest in the security property and should be considered only if the repairs cannot be financed 

through a subsequent loan. Advances will bear interest at the promissory note rate of the loan 

against which they are charged. Advances for borrowers with multiple loans secured by the 

same property should be charged against the largest loan.

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Revised (03-09-22) SPECIAL PN
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13-28

Paragraph 13.15 Protective Advances [7 CFR 3550.206]

1. Determining the Need for Repairs

The need for repairs may be identified by the borrower, Field Office, or the Servicing 

Office. Field Offices are responsible for completing an inspection of the property, 

developing a description of the work required, preparing a cost estimate, and approving 

the protective advance.

2. Alternative Sources of Funding

Before processing the advance, the Field 

Office must first determine whether it appears 

that the borrower qualifies for a subsequent loan. 

If a subsequent loan appears feasible, a loan 

application will be processed immediately. If the 

need for a protective advance is so urgent, clearly

apparent that the borrower would not qualify for a loan, is uncooperative, or that a 

protective advance is more appropriate, the Field Office must document why alternatives 

were not feasible and why the repairs are needed to protective the Government’s interest 

when processing an advance. Protective advances will be reported to the IRS as income 

to the vendor and IRS Form 1099 will be generated. In no case will the borrower or a RD 

employee be listed as the vendor.

B. Advances for Other Purposes

In order to protect the Government’s interest, protective advances also may be used for 

other purposes. These types of advances will be processed and approved by Field Offices or the 

Servicing Office, as appropriate. Field Staff will coordinate efforts with the Servicing Office for 

any loan which is still under the jurisdiction of the Servicing Office. Protective advances for 

other purposes include such items as:

• Paying off a senior lien holder who intends to foreclose in cases where the Agency is 

a junior lien holder;

• Paying taxes or insurance premiums; or

• Paying for local assessments.

Review and Approval

The decision to use a protective 

advance for essential repairs must be 

reviewed and approved by the 

Housing Program Director.
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(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

13.16 OVERVIEW

SECTION 3: LIQUIDATION

The decision to liquidate a loan is made at the Servicing Office. After acceleration and 

any ensuing appeals, the case is sent to the State Office for completion of the liquidation. Once 

legal proceedings have concluded, the property will be sold at a foreclosure sale. To complete 

the foreclosure process, the State Office must determine how much to bid and enter that bid at 

the sale. A net recovery valuation is required. Estimated net recovery value represents the 

amount that the Agency could expect to recover from a property if it was liquidated after 

considering all costs associated with liquidating, holding, and selling the property. Handbook-2-

3550, Attachment 6-A contains a net recovery value worksheet to aid in this calculation. Actual 

net recovery value is the amount the Agency in fact does recover from the sale of a property, 

after accounting for all costs.

13.17 NET RECOVERY VALUE

A. Establishing Market Value 

The market value of the property is the 

fundamental basis for establishing the estimated net 

recovery value. All calculations undertaken on the net 

recovery value worksheet provide additions or 

deductions from market value. In no case will a 

“distressed sale” or similar reduced value be used, resulting in a “double discount” and less 

recovery for the Government. Costs of liquidation and ownership are considered as deductions 

from the market value in the net recovery value calculation. Conversely, likely major costs, such 

as lead-based paint assessment and abatement on an older home or other major repairs, must be 

included to accurately determine the Government’s costs of ownership. 

B. Environmental Considerations 

The estimate of market value must take into consideration potential environmental 

hazards that may pose a liability issue for the Agency and the presence of environmental 

resources for which the Agency will have an affirmative responsibility to take protective 

measures once it owns the property. Exhibit 13-3 provides a partial list of environmental factors 

for consideration. 

In order to minimize Agency liability, the Agency must ensure, prior to acquiring 

property through foreclosure, that the property has been examined for potential contamination 

from hazardous substances, hazardous wastes, and petroleum products, including underground 

Calculation of Net Recovery Value

Market value (less) Costs 

(plus) Income

Net recovery value
4

HB-1-3550

Paragraph 13.17 Net Recovery Value

13-30

storage tanks. This should be accomplished by requesting that Field Staff complete Attachment 

5-B. If the completed attachment raises any concerns, it should be submitted to the State 

Environmental Coordinator for further evaluation and guidance.

The Agency also should examine the property prior to acquisition and consider any costs 

associated with environmental resources the Agency might be required to protect.

For additional information, refer to Chapter 16 and to RD Instruction 1970.

Exhibit 13-3

Environmentally Sensitive Land Uses and 

Resources

Extraordinary Circumstances

• Historic properties

• Federally listed threatened or 

endangered species, critical habitat, 

Federally proposed or candidate species

• Wetlands

• Floodplains

• Any violation of applicable Federal, state, or local statutory, 

regulatory, or permit requirements for environment, safety, and 

health.

• Any proposal that is likely to cause uncontrolled or unpermitted 

releases of hazardous substances, pollutants, contaminants, or 

petroleum and natural gas products.

• An adverse effect on the following environmentalresources:

o Historic properties;

o Federally listed threatened or endangered species, 

critical habitat, Federally proposed or candidatespecies;

o Wetlands;

o Floodplains;

o Areas having formal Federal or state designations such

as wilderness areas, parks, or wildlife refuges; wild and 

scenic rivers; or marine sanctuaries;

o Special sources of water (such as sole source aquifers, 

wellhead protection areas, and other water sources that 

are vital in a region);

o Coastal barrier resources or, unless exempt, coastal 

zone management areas; and

o Coral reefs.

• The existence of controversy based on effects to the human 

environment brought to the Agency’s attention by a Federal, 

tribal, state, or local government agency.
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Paragraph 13.17 Net Recovery Value

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(01-23-03) SPECIAL PN

Revised (01-06-17) PN 492

It is important to note that development on Tribal land or dependent Indian communities 

may require additional coordination with the Tribe to determine if the proposal has an effect on

the human environment or an adverse impact on cultural resources and the Section 106 review. 

In accordance with RD Instruction 1970-H, Exhibit B “when an applicant’s proposal is located 

on tribal lands, defined in 36 CFR § 800.16(x) as all lands within the exterior boundary of any 

Indian reservation and all dependent Indian communities, and that tribe has designated a Tribal 

Historic Preservation Officer (THPO) in accordance with Section 101(d)(2) of NHPA, the SHPO 

participates only under the conditions specified in 36 CFR § 800.2(c)(1)(ii). If the Indian tribe 

has not designated a THPO, then the SHPO participates in Section 106 review pursuant to 36 

CFR § 800.2(c)(2)(i)(B).” Exhibit D of RD Instruction 1970-H provides guidance on working 

with Indian Tribes in the Section 106 review.

C. Ordering an Appraisal

Information about conducting appraisals is contained in Chapter 5. The point at which a 

formal appraisal is actually conducted will vary.

1. Valueless Lien

If the net recovery valuation suggests that the lien may be valueless, an appraisal should be 

obtained immediately. If the appraisal indicates that the lien is in fact valueless, it should be 

released without incurring servicing costs.

2. Deed in Lieu ofForeclosure

If, after acceleration, the borrower offers a deed in lieu of foreclosure, an appraisal should be 

obtained immediately so the Servicer can determine whether it is in the Government’s interest to 

accept the deed.

3. Foreclosure

If the property will be going to foreclosure, no appraisal should be obtained until shortly 

before the sale is scheduled to take place. In areas where the foreclosure process can be lengthy, 

the value of the property could change before the sale if it is conducted too far in advance.
4

HB-1-3550

Paragraph 13.17 Net Recovery Value

13-32

D. Holding Period

Nearly all costs and income used in the net recovery value calculation are affected by the 

holding period. For estimated net recovery value, the length of the holding period is estimated 

differently, depending on the likely method of disposition. The holding period should be 

estimated as the time between the date the net recovery worksheet is being filled out and the 

anticipated date for:

• Filing of the deed and the expiration of redemption rights (foreclosure);

• Filing the warranty deed (deed-in-lieu of foreclosure);

• Filing the release (release of valueless lien); or

• Payoff and release (debt settlement offer subsequent to acceleration).

The time for marketing and disposition, if acquired, should also be considered when 

estimating the holding period.

E. Deductions from Market Value

Costs associated with liquidation and ownership of the property must be considered when 

determining the net recovery value, including the following costs.

• Prior liens to be paid by the Agency. In a case where a prior lien is involved, the 

amount required to repay the prior lien holder must be included in the calculation.

• Junior liens to be paid by the Agency. If the Agency pursues foreclosure, junior 

liens are not paid. However, in the case of a deed in lieu of foreclosure, it may be to 

the Agency’s advantage to pay off a junior lien holder. The Field Office should 

conduct a title search to identify the position and the amount of each lien against the 

property.

• Selling expenses to be paid by the Agency. All of the transaction costs involved in 

selling the property including advertising, commissions for selling agents, required 

seller certifications, surveys, points, and closing costs paid by the Agency, whether on 

behalf of the borrower in a voluntary liquidation, or as an Agency expense for an Real 

Estate Owned (REO) sale, must be included in the calculation.
HB-1-3550

Paragraph 13.17 Net Recovery Value

13-33

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

• Holding costs. During the time that the Agency owns the property, the monthly 

interest accrued is multiplied by the number of months in the holding period.

• Depreciation during the holding period. The property may depreciate in value 

while it is being held by the Agency.

• Administrative costs. The administrative burden associated with holding a property 

includes the cost of liquidation, such as attorney, filing, recordation, advertising, and 

document service fees that are customarily incurred in a foreclosure action.

• Management costs. During the period the Agency holds the property it will accrue 

costs related to cleaning, securing, and maintaining the property such as utilities and 

real estate taxes. Management costs will also include any major repair costs not 

considered in the market value, such as lead-based paint (LBP) assessment and 

abatement, which the Government would be required to incur but not considered as a 

detriment to value by the typical buyer in establishing the market value. While an 

LBP assessment is not completed for the NRV calculation, a reasonable cost estimate 

may be included, based on age and condition of the property and known local coststo 

abate similar properties.

F. Additions to Market Value

Although most of the adjustments to market value involve deductions to reduce the 

recovery amount, there are a few factors that can increase the market value.

• Appreciation during the holding period. In markets that are strong, the property 

may appreciate while it is being held by the Agency.

• Income during the holding period. In general, the Agency does not lease 

properties. However, REO properties may be leased in limited circumstances, such 

as a property located in an area where keeping the property occupied could greatly 

reduce vandalism.
4 

13-34

 HB-1-3550

13.18 BASIC SECURITY LOSS

The basic security loss is the difference 

between the property’s market value and the 

outstanding Agency debt on the property, 

including principal, subsidy subject to recapture, 

and other recoverable costs. Exhibit 13-4 

provides the basic security loss formula.

It is important for the Agency to consider 

the basic security loss in determining how to 

work with the borrower. For example, the debt 

settlement arrangements the Agency agrees to might be more lenient in the case of a borrower 

with a property that lost value through no fault of the borrower. More important, this 

information can be used for portfolio analysis to help the Agency originate loans more 

effectively in the future. 

13.19 DEED IN LIEU OF FORECLOSURE

A deed in lieu of foreclosure is a method of liquidation by which title to the security 

property is conveyed to the Agency by the borrower. The Agency must not consider a 

borrower’s offer to convey the title to the security property until after the account is accelerated, 

and then only when it is in the best interest of the Government based upon the estimated net 

recovery value. After an account has been accelerated, a deed in lieu of foreclosure is processed

and approved by Field Offices. In exceptional cases where a borrower offers to convey title to 

the property at a Field Office when the account has not been accelerated, the Field Office will 

immediately contact the Servicing Office to determine an appropriate course of action.

To process a deed in lieu of foreclosure, Field Offices will obtain the following items 

from the borrower: (1) a warranty deed; (2) Form RD 1955-1, Offer to Convey Security; and (3) 

copies of any leases or other documents affecting the title to the property. The borrower should 

be informed that the deed will not be recorded unless the conveyance is accepted.

Generally, borrowers will be required to satisfy liens and real estate taxes or assessments 

before conveyance is accepted. However, if the borrower is unwilling to do so, the Agency may 

elect to satisfy or settle these debts if it is in the best interest of the Government.

Exhibit 13-4 

Calculation of Basic Security Loss

Gross Investment

A. $ Principal

B. $ Subsidy Recapture

C. $ Recoverable Costs

Market Value (use current appraisal) 

Basic Security Loss
HB-1-3550

13-35

(01-23-03) SPECIAL PN

Revised (03-09-22) SPECIAL PN

Paragraph 13.19 Deed In Lieu of Foreclosure

A deed in lieu of foreclosure does not automatically release the borrower from liability 

for any outstanding debt. The borrower’s account will be credited with the actual net recovery 

value. If the actual net recovery value does not satisfy the debt, the remaining debt must be debt 

settled by the Servicing Office.

The borrower should be reminded that under a deed in lieu of foreclosure:

• Foreclosure action will not be suspended while the offer for a deed in lieu of 

foreclosure is considered;

• All costs related to the conveyance paid by the Agency will be added to the debt;

• A credit equal to the actual net recovery value will be applied to the debt;

• If the borrower does not satisfy the debt, the borrower will not automatically be 

released from liability; and

• The borrower will be required to provide a title insurance policy or a final title 

opinion from an Agency-approved title company or attorney.

13.20 FORECLOSURE

State laws pertaining to acceleration and foreclosure will affect the

procedures the Agency is required to follow. The Servicing Office will consult with OGC to 

ensure that appropriate procedures are followed.

A. Making the Acceleration Decision

The Servicing Office must decide whether to accelerate the account and begin the 

foreclosure process. The decision to accelerate involves numerous considerations, many of

which will vary case-by- case. The following issues should always be considered.

1. OGC Concurrence

The Servicing Office obtains OGC concurrence before beginning the foreclosure 

process if:

• The foreclosure is based on a nonmonetary default;

• The borrower obtained the loan while a civilian and entered military service after the

loan was closed; or
4

HB-1-3550

Paragraph 13.20 Foreclosure

13-36

• The property also serves as security for a loan under another United States 

Department of Agriculture (USDA) Agency program such as the Farm Service 

Agency (FSA), since this may trigger liquidation of the other loan.

2. Role of Other Lien Holders

Depending upon the status of other liens on the security property, the Agency may 

invite other lien holders to join in the foreclosure action or join in a foreclosure action 

initiated by another lien holder.

When the Field Office becomes aware of a prior lienholder foreclosure, a 

determination must be made if it is advantageous to pay the prior lienholder in full before 

the foreclosure sale. When making this determination the Field Office must consider if 

the government will obtain a greater recovery on the secured debt than it could by 

bidding at the foreclosure sale based on the net recovery value and whether the agency 

wishes to continue with the borrower. If the decision is made to pay off the prior 

lienholder a title opinion must be obtained. Field Offices will note the account and fax a 

copy of the foreclosure notice to the Servicing Office, Direct Loss Mitigation Section at 

314-457- 4553. The Field Office will need to track the progress of the prior lienholder’s 

foreclosure manually until the time of the sale. Once the foreclosure template is 

established, the Field Office is responsible for updating the tasks on the template, using 

the date provided by the lender. If a third party purchases the property at the sale, the 

proceeds are shown in the sale amount field. Attachment 13-D provides guidance for 

obtaining funds to pay off the lienholder.

When the Servicing Office becomes aware that a prior lienholder has initiated 

foreclosure action, the State and Field Office will be notified by fax and telephone call. 

When the Agency becomes aware of a prior lienholder foreclosure, a determination must 

be made whether the Form RD 1927-8, “Agreement with Prior Lienholder” or similar 

state form was executed in connection with a leveraged loan. When the Prior Lienholder 

Agreement was executed, and the lender failed to give notice, the Agency will consult 

with the Office of General Counsel to protect the Government’s interest. The Agency 

will also consult with the Lender about compliance with the Prior Lienholder Agreement 

and Lenders who fail to comply with the prior notice requirements will be counseled.

Lenders who are unable to comply with the prior notice requirements should not be 

considered for future leveraged packages.

Assignment of promissory notes and security instruments is authorized where a junior 

lienholder is foreclosing its lien and is paying the Agency in full.
HB-1-3550

Paragraph 13.20 Foreclosure

13-37

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN 

Recapture will be calculated if the junior lienholder provides the necessary 

information. 

B. Acceleration

1. The Acceleration Notice

If the Servicing Office determines that the appropriate approach to liquidation is 

foreclosure, the process begins with an acceleration notice. The acceleration notice 

demands full payment of the account including unpaid principal and interest, advances, 

and subsidy subject to recapture. It notifies the borrower of: (1) the reason for the 

acceleration; (2) the amount due; (3) the method of payment; (4) the opportunity for an 

informal discussion with the decision maker; and (5) the process for requesting an 

administrative appeal hearing. The notice gives the borrower 30 days to pay in full or 

request a hearing.

The notice must be sent to the borrower and any cosigners simultaneously by both 

regular mail and certified mail. If the property address is different from the address of 

the borrower, the notice should be sent to the property address as well. 

2. Treatment of Payment Subsidy

If a borrower is receiving payment subsidy, the payment subsidy agreement will not 

be canceled when the debt is accelerated, but the agreement will not be renewed when it 

expires unless the account is reinstated.

3. Special Servicing

After a borrower’s account has been accelerated, the borrower is no longer eligible 

for any of the special servicing actions described in Chapter 5. 

4. Assignment of SecurityInstruments

Assignment of promissory notes and security instruments is authorized when an 

account has been accelerated, all appeals have been exhausted, the case has been 

accepted by OGC for foreclosure, and the Agency is being paid at least the net recovery 

value of the security property. 

5. Offers to Pay

Field Offices will refer offers to cure the default to the Servicing Office. The 

borrower is permitted to cure the default and retain the loan under the following 

conditions: 
4 

HB-1-3550

Paragraph 13.20 Foreclosure

• The Agency is required by state law to reinstate the loan; or 

• The agency is required by a decision from National Appeals Division (NAD) to 

reinstate the loan; or

• At the sole discretion of the Agency, when it is in the Government’s best financial 

interest.

For borrowers whose accounts have been accelerated 45 days or less, the cure amount 

will be quoted by the Servicing Office (unless the account is noted as a no cure account). 

The borrower will be instructed to send certified funds to the retail lockbox or use 

Western Union Quick Collect or Money Gram 45 days from acceleration. 

Borrowers whose accounts have been accelerated more than 45 days will be referred 

by the Servicing Office to the appropriate State/Field Office. If appropriate, the 

State/Field Office will interact with the Office of the General Counsel/U.S. Attorney’s 

office to determine if a cure can be accepted and document the recommendation in global 

notes. State/Field Offices may calculate the cure amount or if assistance is needed, 

contact the Servicing Office, SFH Assistance Section. All funds to cure an account must 

be certified or remitted using electronic funds (Western Union Quick Collect or Money 

Gram). The use of Customer Initiated Payments (CIP) or “check by phone” will not be 

used to cure an account, as these funds are not guaranteed. 

When an offer is made to pay less than the full amount to cure the default, 

Attachment 13-C must be completed. The attachment, including concurrence by the 

State Director will be sent to the Deputy Administrator, the Servicing Office, for 

approval along with any supporting documentation. A request to reamortize the account 

must also be submitted at this time if the borrower is unable to pay the shortage within 

30 days from acceptance of the offer. The request for approval of the offer should be 

submitted to the Servicing Office, SFH Assistance Section. 

If approved, the State/Field Office will submit the certified funds agreed upon along 

with a payment assistance package (if payment assistance has expired). If the borrower 

can pay the shortage within 30 days and a reamortization is not necessary, this should be 

noted on the funds transmittal. The State/Field Office is responsible for ensuring the 

borrower pays the approved cure amount as agreed. If the account is reamortized, an 

escrow will be established, if not already in place. 

When the State/Field Office determines it is not in the best interest of the Agency to 

accept a cure, Task #802 will be sent to the Servicing Office to have the account coded 

to prevent future cures. In mandatory cure states, offers to cure the default and

associated charges will not be refused.

13-38
HB-1-3550

Paragraph 13.20 Foreclosure

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

• Submission of Funds - For accounts accelerated more than 45 days, the State/Field 

Office will collect and forward the funds to the wholesale lockbox on a Form RD 

3550-17, Funds Transmittal Report. The lockbox address is USDA/RHS, P.O. Box 

790300, St. Louis, MO 63179. If the borrower wishes to cure the account using 

electronic funds (Western Union Quick Collect or Money Gram), the State/Field 

Office should make sure the account is thoroughly noted with the control number for 

tracking purposes. 

• Payment Assistance - If the payment assistance has expired or the borrower’s income 

has changed, at the time the borrower cures the account, the State/Field Office should 

assist the borrower in completing a new payment assistance package. The payment 

assistance certification with the supporting documentation should be forwarded with 

Form RD 3550-17 and the cure funds to the wholesale lockbox. If the account was 

cured via Western Union Quick Collect or Money Gram, the payment assistance 

information should be sent to the SFH Assistance Section with a cover letter 

explaining that the account was cured via electronic funds. The payment assistance 

agreement will be made effective with the first due date following the cure date, if a 

complete package is received within 30 days from the date of the cure.

Funds submitted by a borrower to a Field Office should be sent to the lockbox on 

Form RD 3550-17, “Funds Transmittal Report.” 

C. Review of the Acceleration Decision

Several remedies are available to borrowers who believe their accounts should not have 

been accelerated. These include an informal administrative review at the Servicing Office, 

mediation or a formal appeal with the NAD. Paragraph 1.9 describes the appeal and review 

process in detail.

D. Initiating Legal Proceedings 

Field Offices should continue the foreclosure process 30 days after the acceleration notice 

is sent if the borrower does not request an informal review or appeal the acceleration decision, or 

as soon as NAD upholds the Agency’s decision to foreclose. 

The Agency will only seek a deficiency judgment (in those States where available) when 

foreclosure is initiated and the Agency determines the borrower has or will have assets from 

which a deficiency judgment could be recovered. Deficiency judgments will never be sought in 

the following situations: (1) acceleration is due to an unpaid recapture amount; (2) the borrower 

was granted a moratorium at any time during the course of the loan and faithfully tried to meet 

the loan obligations; (3) State law does not permit a personal deficiency; (4) in nonjudicial 

foreclosure States, the United States Attorney will not accept a referral for the deficiency; or (5) the 

Agency has determined after consultation with OGC that it is not cost effective to seek a deficiency 

on a particular case.

13-39
4 

HB-1-3550

Paragraph 13.20 Foreclosure

If the security property is located on tribal allotted or trust land, liquidation may not proceed 

until after the State Director has offered, in writing, to transfer the account to an eligible tribal 

member, the tribe, or the Indian Housing Authority servicing the tribe or tribes. This offer is made 

after the account has been accelerated, the appeals process has been concluded and the case sent to 

the respective State Office.

E. The Foreclosure Sale

Once legal proceedings have concluded, the property will be sold at a foreclosure sale. To 

complete the foreclosure process, Field Offices must determine how much to bid and enter that bid at 

the sale.

1. Establishing a Bid Amount

The Agency’s bid will be the lesser of the Agency’s gross investment or the estimated net 

recovery value of the security property. 

Gross investment is the sum of:

• The unpaid balance, defined as:

◊ In states with judicial foreclosure, the judgment account established as a result of the 

foreclosure judgment. 

◊ In states with non-judicial foreclosure, the borrower’s account balance reflecting 

secured loans and advances.

• All outstanding advances and fees charged to the borrower’s account. 

• Total subsidy received.

• Bidding at the Foreclosure Sale

Procedures for bidding at a sale will vary by locality and a local presence may be 

required. If the Agency is the high bidder, the property will become REO property, which 

will be managed and disposed of by the Field Office. In order to acquire the property 

through the LoanServ System, send Task #229 to the Servicing Office noting the Agency 

was the successful bidder at the sale. The Servicing Office will then create the foreclosure 

template to allow the field to acquire the property. The Field Office will be responsible for 

updating the tasks on the template. 

If the amount received through the foreclosure sale is less than the borrower’s 

outstanding debt, the Servicing Office will handle the debt settlement procedures. 

 1 

13-40
HB-1-3550

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN 

ATTACHMENT 13-A 

Attachment 13-A 

Page 1 of 1

Type of Payoff Statement

Statement of Loan Balance (includes total subsidy received)

Final Payoff w/recapture

Sale Refinance Other 

Other (explain) 

Account Information 

Account Number(s): 

Borrower Name:

Property Address:

Payoff Information 

$ Market Value/ (sales price, appraised value, or assessment)*

$ Value of Capital Improvements* 

$ Closing Costs*

$ Amount of Original Equity

 Percent of Original Equity

$ Effective Date of Payoff 

If payoff statement will be used for internal purposes only, documentation should be maintained in the 

Field/State Office. If payoff statement is to be provided to a third party, include documentation along 

with this request.

Foreclosure Accounts: unapplied/unprocessed vouchers to be added to the payoff quote. 

Amount of Charge Type of Charge

$ 

$ 

$ 

[ ] Check here if additional fees have been confirmed through the State Office. If this box is checked, the 

Servicing Office will not send a Task 94 to the State Office for additional fees.

Field/State Office Information (all fields are required)

Person Making Request 

Phone Number

Fax Number 

Reviewed By

The Servicing Office Payoff Department FAX # (314) 457-4433 

REQUEST FOR PAYOFF STATEMENT

(This form to be used for Field/State Office functions only.)
4 

ATTACHMENT 13-B 

HB-1-3550

Attachment 13-B 

Page 1 of 1 

Servicing and Asset Management Office (the Servicing Office) 

Field Support Services 

Phone (314) 457-5200 fax (314) 457-4441 

ACCOUNT ISSUE AND SUGGESTED RESOLUTION SHEET

State County Code Date Submitted

Contact Person 

Phone Number ext. 

Fax Number

Account 

Number

Account Name Account Issue Field Office Suggested 

Resolution

MOTI %

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN
HB-1-3550

(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

ATTACHMENT 13-C

CURE AND FINANCIAL STATEMENT

Attachment 13-C

Page 1 of 3

Part 1 Delinquency Information

Part 2 Household Income

Name of Borrower:

Name of Co-Borrower:

Address of Borrower:

Customer Account #:

Number of Times Customer Cured account in past 24 months and dates cured:

1. Reason for Delinquency:

2. Documentation to Support proof of payments being made (home repairs, medical expenses, other obligations:

3. Recommendation to cure:

Borrower:

(Wages, tips, overtime, etc.)

$

Co-Borrower:

(Wages, tips, overtime, etc)

$

Other:

(Social Security, retirement, alimony, 

child support, AFDC, other income, etc.)

$
4 

HB-1-3550

Attachment 13-C 

Page 2 of 3

SHORT CURE REAM CHECKLIST

BORROWER INFORMATION ACCOUNT #

1  Borrower(s) Name

2  Property Address

3  Short Cure Approval Date:

4  Total Short Cure Amount

5  Date Funds Received

6  Preparer and Contact 

Information

7  Local/State Office Phone #

8  Date Submitted to the 

Servicing Office

The documents listed below are needed to complete the Short Cure Ream. Please fax these 

documents to SFH Assistance Section @ (314) 457-4441. Please note TOTAL SHORT 

CURE AMOUNT and DOCUMENTS must be received in order to begin the Ream process. 

The Servicing Office will not accept partial cures or funds directly from the borrower. 

Short Cure Documents Needed Comments

9  Signed Approval Letter from the State 

Office

Letter must be signed by State Director or Designee

10 Complete Payment Assistance Packet 

(Form RD 3550-21)

If the account is eligible for subsidy, a completed 

Payment Assistance packet must be included and

faxed to Field Assistance.

11 Copy of completed Funds Transmittal 

Report (FTR) (Form RD 3550-17) and 

Cashier Check or Money Order.

Please indicate on the FTR that funds are for SHORT 

CURE REAM.

Note: The Servicing Office will not accept anything 

less than the total short cure amount listed on FTR.

12 Please remit the total Short Cure 

amount in form of a Cashier Check or 

Money Order along with the original 

Funds Transmittal Report (Form RD 

3550-17)

Please advise borrower not to send fundsto the 

Servicing Office. The Servicing Office will not post 

partial funds, any amount less than the short cure 

amount will be returned. The total short cure 

amount must be received and posted to the account 

prior to beginning the reamprocess USDA RD

P.O. Box 790300

ST. LOUIS, 63179-0300

13 Cure & Financial Statement document 

HB-1 Attachment 13-C

Required
(01-23-03) SPECIAL PN 

Revised (03-09-22) SPECIAL PN

HB-1-3550

Attachment 13-C 

Page 3 of 3

INSTRUCTIONS FOR COMPLETING SHORT CURE REAM 

CHECKLIST

1 Required - Enter all Borrower Names (First, Middle and Last)

2 Required - Enter the full Property Address

3 Required - Enter the date the Short Cure was approved (Month, Day and Year)

4 Required - Enter the Total Short Cure Amount agreed upon

5 Required - Enter the Date Total Short Cure Amount was received

6 Required - List the name of the contact person approving the Short Cure

7 Required - Provide the phone number of the contact person

8 Required - Date mailed (submitted) to National Financial and Accounting Operations

9 Required - Signed Approval Letter from the State Office: Letter must be signed by 

State Office Director or Designee

10 Optional - Complete Payment Assistance Packet (Form RD 3550-21): Required if

the account is eligible for subsidy, a completed Payment Assistance packet must be 

included and faxed to SFH Assistance Section. 

11 Required - Copy of completed Funds Transmittal Report (FTR) (Form RD 3550-17) 

and copy of the Cashier Check or Money Order: Please indicate on the FTR that funds 

are for SHORT CURE REAM. Note: The Servicing Office will not accept anything less 

than the total cure amount listed on FTR. 

12 Required - Please remit the total Short Cure amount in form of a Cashier’s Check 

or Money Order along with the original Funds Transmittal Report (Form RD 3550-17) 

USDA RD

P.O BOX 790300 

ST. LOUIS, 63179-0300 

Please advise borrower not to send funds to the Servicing Office. The total short cure

amount must be received and posted to the account prior to beginning the ream process. 

The Servicing Office will not post partial funds, any amount less than the short cure 

amount will be returned.

13 Cure & Financial Statement document HB-1 Attachment 13-C. 

Required documentation 
4 

ATTACHMENT 13-D 

HB-1-3550

Attachment 13-D 

Page 1 of 2

Notice of Foreclosure Sale – At least two weeks prior to sale, the Field Office must contact 

Prior Lien Holder to determine the procedure for bidding at sale: 

• If the Agency is the successful bidder, how soon must funds be submitted?

• Is a deposit required on day of sale? What is the minimum deposit amount? 

• Must the entire bid amount be paid the day of sale?

Securing of Funds – The State Office must assure that sufficient funds are available in the 

State’s R/L funds bucket. If the State exceeds 90% of the entire State’s allocation, authorization 

of the proposed voucher must be obtained. Procedures for acquiring additional funds can be 

found in RD Instruction 2024-A, Exhibit D. 

Vouchering for Funds – When requesting emergency funds, the following information must be 

faxed to USDA St. Louis, Missouri at (314) 457-4374, ATTN: Team 3: 

• RD Instruction 2024-A, Exhibit K, “Request for Emergency Payment”

• Form RD 2024-30, “Non-Contractual Program Loan Cost Expense (PLCE) 

Certification”

• Form AD-838, “Purchase Order”

• Form AD-838-B, “Invoice-Receipt Certification” 

[COPIES OF ABOVE FORMS ATTACHED]

(01-23-03) SPECIAL PN

Revised (04-26-12) PN 456

RUSH FUNDS PROCESSING
HB-1-3550

Attachment 13-D 

Page 2 of 2

Determining Voucher Amount – Based on information received from Prior Lien Holder, the 

amount of voucher will be: 

If a deposit is required The voucher amount will be 10% of the 

Net Recovery Value amount as 

determined by a current appraisal and 

the NRV worksheet or the minimum 

amount required by Lender. 

If the full amount is required If the Agency is the successful bidder, 

the amount of the voucher will be an 

amount that exceeds the Prior Lien 

Holder’s bid but not to exceed the Net 

Recovery Value.

Delivery of Funds – It is imperative that vouchers for emergency funds are submitted to St. 

Louis, Missouri, as soon as possible. All efforts will be made to have funds available to Field 

Offices as required for Foreclosure Sale. Funds will primarily be sent via Electronic Funds 

Transfer (EFT) based on submission time to St. Louis, Missouri. 

• If the funding request is made in accordance with RD Instructions 2024-A, Exhibit K, and 

received in St. Louis, Missouri, before 12:30 p.m. CST, funds will be sent the same day. 

• If the funding request is received in St. Louis, Missouri, after 12:30 p.m. CST, funds will 

be sent the next business day.

• If there are no electronic funds transfer facilities available, funds will be overnight 

expressed the next day. 

Questions pertaining to emergency funds requests should be e-mailed to dcfo-fcb2@stl.usda.gov.