HB-1-3565

Table of Contents

Page 1

TABLE OF CONTENTS

Page

CHAPTER 1: OVERVIEW OF GUARANTEED RURAL RENTAL HOUSING 

PROGRAM ORIGINATION AND SERVICING HANDBOOK................ 1-1

1.1 Introduction....................................................................................................... 1-1

SECTION 1: THE HANDBOOK......................................................................................... 1-1

1.2 Purpose..................................................................................................................... 1-1

1.3 Using the Handbook ................................................................................................ 1-2

A. Handbook Symbols........................................................................................... 1-2

B. Citations and Text Boxes.................................................................................. 1-2

C. Attachments and Appendices............................................................................ 1-3

SECTION 2: THE RURAL HOUSING SERVICE (RHS)................................................ 1-3

1.4 RHS Organization.................................................................................................... 1-3

SECTION 3: OVERVIEW OF THE GUARANTEED

RURAL RENTAL HOUSING PROGRAM................................................. 1-3

1.5 Program Goals ......................................................................................................... 1-3

1.6 Eligible Rural Area .................................................................................................. 1-4

1.7 Program Features..................................................................................................... 1-4

A. Risk Sharing with Lenders................................................................................ 1-5

B. Affordability Features....................................................................................... 1-5

C. Construction and Permanent Financing............................................................ 1-5

D. Lender Origination, Servicing, and Disposition ............................................... 1-5

E. The Notice of Program Funding Process.......................................................... 1-6

1.8 Roles and Responsibilities of Agency, Lender and Borrower ................................. 1-6

1.9 Identity of Interests.................................................................................................. 1-7

1.10 Agency Exception Authority ................................................................................... 1-8

1.11 Reviews and Appeals............................................................................................... 1-9

SECTION 4: FEDERAL REQUIREMENTS ................................................................... 1-10

1.12 Intergovernmental Review..................................................................................... 1-10

1.13 National Flood Insurance Program........................................................................ 1-10

1.14 Historic Preservation.............................................................................................. 1-10

(02-23-12) PN 455

Revised (11-15-19) PN 531
HB-1-3565

Table of Contents

Page 2

1.15 Civil Rights............................................................................................................ 1-10

A. Nondiscrimination........................................................................................... 1-10

B. Reasonable Accommodations for Persons with Disabilities .......................... 1-11

1.16 Fair Housing........................................................................................................... 1-12

1.17 Environmental Requirements................................................................................. 1-12

Attachment 1-A: Review and Appeals of Adverse Agency Decisions

CHAPTER 2: LENDER ELIGIBILITY AND APPROVAL ............................................... 2-1

2.1 Purpose and Overview............................................................................................. 2-1

SECTION 1: LENDER ELIGIBILITY............................................................................... 2-2

2.2 Purpose..................................................................................................................... 2-2

2.3 Requesting Lender Eligibility.................................................................................. 2-2

2.4 Basic Eligibility Test Requirements........................................................................ 2-2

2.5 Demonstrated Eligibility Test Requirements........................................................... 2-3

2.6 Eligibility Requirements.......................................................................................... 2-3

A. Origination and Servicing Plan......................................................................... 2-3

B. Demonstrate the Lender’s Financial Stability................................................... 2-5

C. The Lender’s Certification to Comply with Program Requirements................ 2-5

2.7 Additional Requirements for Approval to Originate and Service 

Option Two and Option Three Loan Guarantees..................................................... 2-5

2.8 Participation by Lenders without Demonstrated Ability ......................................... 2-6

SECTION 2: ELIGIBILITY APPLICATION PROCESSING........................................ 2-6

2.9 Overview.................................................................................................................. 2-6

2.10 Agency Assessment of the Request ......................................................................... 2-6

2.11 Submission Requirements — Lender Application .................................................. 2-7

2.12 Issuance of Approved Lender Status ....................................................................... 2-8

SECTION 3: MAINTENANCE OF LENDER APPROVAL............................................ 2-8

2.13 Requirements for Retaining Approved Status ......................................................... 2-8

SECTION 4: OTHER ISSUES............................................................................................. 2-9

2.14 Substitution of Lender.............................................................................................. 2-9

2.15 Use of Agents by the Approved Lender ................................................................ 2-10

2.16 Loan Participations................................................................................................ 2-10

2.17 Transfer of Servicing ............................................................................................. 2-10
HB-1-3565

Table of Contents

Page 3

CHAPTER 3: LENDER UNDERWRITING......................................................................... 3-1

3.1 Introduction.............................................................................................................. 3-1

SECTION 1: LENDER UNDERWRITING RESPONSIBILITIES................................ 3-1

3.2 Overview.................................................................................................................. 3-1

3.3 Summary of Lender Responsibilities....................................................................... 3-2

SECTION 2: LENDER NARRATIVE ............................................................................... 3-2

3.4 Narrative Requirements........................................................................................... 3-2

SECTION 3: BORROWER ELIGIBILITY ...................................................................... 3-3

3.5 Overview.................................................................................................................. 3-3

3.6 Eligible Borrowers................................................................................................... 3-3

3.7 Ineligible Borrowers................................................................................................ 3-4

3.8 Borrower Types ....................................................................................................... 3-4

A. General or Limited Partnerships....................................................................... 3-6

B. Corporations...................................................................................................... 3-6

C. Limited Liability Companies............................................................................ 3-7

D. Trusts................................................................................................................. 3-7

E. Public Agencies ................................................................................................ 3-7

F. Indian Tribes..................................................................................................... 3-7

G. Individuals......................................................................................................... 3-8

3.9 Certification of Legal Eligibility.............................................................................. 3-8

3.10 Borrower Experience and Capacity ......................................................................... 3-8

A. Construction and Rehabilitation Experience .................................................... 3-8

B. Property Management Experience.................................................................... 3-9

C. Financial Capacity .......................................................................................... 3-10

SECTION 4: PROPERTY REQUIREMENTS ............................................................... 3-14

3.11 Overview................................................................................................................ 3-14

3.12 Rural Area Designation.......................................................................................... 3-14

3.13 General Site Requirements .................................................................................... 3-14

A. Public Facilities and Services......................................................................... 3-15

B. Less Desirable Areas....................................................................................... 3-15

3.14 Site Standards......................................................................................................... 3-15

A. Applicable Codes............................................................................................ 3-15

B. Adequate Utilities and Infrastructure.............................................................. 3-16

(02-23-12) PN 455

Revised (07-21-23) PN 588
HB-1-3565

Table of Contents

Page 4

C. Grading and Drainage ..................................................................................... 3-16

D. Size and Shape ................................................................................................ 3-16

E. Undesirable Physical Conditions.................................................................... 3-16

3.15 Site Density............................................................................................................ 3-16

3.16 Non-Contiguous Sites............................................................................................ 3-16

3.17 Site Control............................................................................................................ 3-17

A. Land Ownership.............................................................................................. 3-17

B. Land Lease...................................................................................................... 3-17

3.18 Environmental Requirements................................................................................. 3-18

A. Lender Responsibilities Prior to Requesting Guarantee ................................. 3-18

B. Agency Environmental Review...................................................................... 3-19

3.19 Civil Rights............................................................................................................ 3-19

3.20 Project Development.............................................................................................. 3-19

A. Project Size ..................................................................................................... 3-20

B. Agency Construction Requirements............................................................... 3-20

C. Federal Accessibility Requirements ............................................................... 3-21

SECTION 5: FINANCING TERMS................................................................................. 3-23

3.21 Overview................................................................................................................ 3-23

3.22 Occupancy and Rent Restrictions.......................................................................... 3-23

3.23 Use of Loan Proceeds............................................................................................ 3-25

A. Eligible Uses of Loan Proceeds...................................................................... 3-25

B. Ineligible Uses of Loan Funds........................................................................ 3-26

3.24 Applying Section 207(c) Loan Limits................................................................... 3-27

3.25 Mortgage Terms..................................................................................................... 3-28

A. Maximum Loan Term..................................................................................... 3-28

B. Maximum Interest Rate................................................................................... 3-28

C. Interest Reduction Credit ................................................................................ 3-28

D. Maximum Loan Amount................................................................................. 3-29

SECTION 6: DETERMINING PROPERTY VALUE.................................................... 3-30

3.26 Overview................................................................................................................ 3-30

3.27 Cash Flow Analysis............................................................................................... 3-30

A. Operating and Maintenance Expense.............................................................. 3-30

B. Debt Service.................................................................................................... 3-31
HB-1-3565

Table of Contents

Page 5

3.28 APPRAISAL ..................................................................................................... 3-33

A. Appraisal Requirements.................................................................................. 3-33

B. Appraiser Qualifications................................................................................. 3-33

C. Appraisal Methods.......................................................................................... 3-33

D. Appraisal Report Guidelines........................................................................... 3-34

E. Market Study................................................................................................... 3-34

CHAPTER 4: LOAN GUARANTEE APPLICATION PROCESSING ............................. 4-1

SECTION 1: AN OVERVIEW OF THE PROCESS ......................................................... 4-1

4.1 Purpose..................................................................................................................... 4-1

SECTION 2: NOTICE OF PROGRAM FUNDING......................................................... 4-1

4.2 Publication of GRRHP Requirements ..................................................................... 4-1

4.3 Response to the Notice............................................................................................. 4-1

4.4 Information to be Included in Response to the Notice ............................................ 4-2

A. Descriptive Information.................................................................................... 4-2

B. Lender Eligibility and Approval Status ............................................................ 4-3

C. Competitive Criteria.......................................................................................... 4-3

D. Lender Commitment Letter............................................................................... 4-3

4.5 Agency Review of Notice Response........................................................................ 4-3

A. Was the Project Proposal on Time and Complete?........................................... 4-3

B. Is the Borrower An Eligible Entity? ................................................................. 4-4

C. Is the Lender Eligible?...................................................................................... 4-4

D. Is the Proposed Project Eligible? ...................................................................... 4-4

4.6 Notice to Proceed with Application Processing....................................................... 4-5

SECTION 3: APPLICATION FOR THE GUARANTEE................................................. 4-6

4.7 Purpose of the Application....................................................................................... 4-6

A. The Proposed Project Meets the GRRHP Threshold Requirements................. 4-6

B. The Proposed Project is Eligible to Receive a Conditional Commitment........ 4-6

4.8 Application Form and Documentation..................................................................... 4-7

A. The Lender’s Certification................................................................................ 4-7

B. Exhibits and Supporting Information to the Lender’s Certification ................. 4-7

4.9 Interest Credit Request and Documentation .......................................................... 4-11

A. Amount of Interest Credit Subsidy ................................................................. 4-11

B. Demonstrated Need......................................................................................... 4-11

(02-23-12) PN 455 

Revised (09-07-22) SPECIAL PN
HB-1-3565

Table of Contents

Page 6

C. Limits on Allocation of Interest Credit........................................................... 4-11

D. Payment of Interest Credit .............................................................................. 4-11

E. Cancellation of Interest Credit........................................................................ 4-13

F. Closing a Loan with Interest Credit................................................................ 4-13

4.10 Lender Review of the Borrower Submissions....................................................... 4-13

A. Borrower Eligibility........................................................................................ 4-13

B. Project Eligibility............................................................................................ 4-14

C. Project Feasibility Analysis............................................................................ 4-15

4.11 Agency Review of the Loan Guarantee Application ............................................. 4-16

A. Determination that the Loan Guarantee Application Package is Complete ... 4-16

B. Environmental Review by Agency ................................................................. 4-16

C. Civil Rights Impact Analysis.......................................................................... 4-16

D. Review of Other Federal Requirements.......................................................... 4-16

E. Review of Affirmative Fair Housing Marketing Plan (AFHMP)................... 4-17

F. Decision on Interest Credit Subsidy Request.................................................. 4-19

G. Decision on the Guarantee Amount................................................................ 4-19

H. Determination that the Loan is Acceptable for a Conditional Commitment .. 4-19

4.12 Agency Decision.................................................................................................... 4-20

SECTION 4: ISSUANCE OF CONDITIONAL COMMITMENT ............................... 4-20

4.13 General Requirements............................................................................................ 4-20

4.14 Terms of Conditional Commitment....................................................................... 4-21

A. Subsidy Layering Review.............................................................................. 4-22

B. Guarantee Fee ................................................................................................ 4-22

C. Transactions Backed by Ginnie Mae ............................................................. 4-22

D. Termination of the Conditional Commitment................................................ 4-22

E. Substitution of Lender.................................................................................... 4-23

F. Lender’s Agreement....................................................................................... 4-23

G. Loan Note Guarantee Agreement .................................................................. 4-23

SECTION 5: RESPONSE TO THE 

CONDITIONAL COMMITMENT AND LOAN CLOSING.......................................... 4-24

4.15 General Conditions................................................................................................ 4-24

4.16 Development of the Regulatory Agreement .......................................................... 4-24

4.17 Loan Closing.......................................................................................................... 4-24

SECTION 6: GUARANTEE DURING CONSTRUCTION............................................ 4-25

4.18 Continuous Guarantee and Construction Guarantee and Related Reserves .......... 4-25
HB-1-3565

Table of Contents

Page 7

SECTION 7: PERMANENT GUARANTEE.................................................................... 4-26

4.19 Occupancy.............................................................................................................. 4-26

4.20 Documentation Requirements................................................................................ 4-27

SECTION 8: TERMINATION OF THE LOAN GUARANTEE .................................. 4-30

4.21 Reasons for Termination........................................................................................ 4-30

A. Repayment of the Loan................................................................................... 4-30

B. Payment of a Claim......................................................................................... 4-30

C. Voluntary Termination of the Guarantee Agreement by the Lender.............. 4-30

D. Non-Compliance with Program Requirements............................................... 4-30

E. Fraud ............................................................................................................... 4-31

Attachment 4-A: Section 538 GRRHP Application Checklist

Attachment 4-B: Suggested Format for the Opinion of the Lender's Legal Counsel

Attachment 4-C: Closing Documents to be Submitted as Part of the Final Application

Attachment 4-D: Housing Allowances for Utilities and Other Public Services

Attachment 4-E: Planning Meeting Agenda

CHAPTER 5: CONSTRUCTION REQUIREMENTS .......................................................... 5-1

5.1 Introduction.............................................................................................................. 5-1

SECTION 1: PRE-CONSTRUCTION CONFERENCE.................................................. 5-2

5.2 Conference Requirements........................................................................................ 5-2

SECTION 2: BASIC CONSTRUCTION REQUIREMENTS .......................................... 5-2

5.3 Overview.................................................................................................................. 5-2

5.4 Construction Contractor Experience and Capacity.................................................. 5-3

5.5 Debarment and Suspension...................................................................................... 5-3

5.6 Architectural Services and Capital Needs Assessments.......................................... 5-3

5.7 Plans, Specifications and Cost Estimates................................................................. 5-4

5.8 Environmental Requirements................................................................................... 5-5

5.9 Construction............................................................................................................. 5-6

5.10 Inspections............................................................................................................... 5-6

5.11 Warranty .................................................................................................................. 5-8

5.12 Construction Requirements Certification . .............................................................. 5-8

(02-23-12) PN 455 

REVISED (09-07-22) SPECIAL PN
HB-1-3565

Table of Contents

Page 8

SECTION 3: GUARANTEES OF CONSTRUCTION ADVANCES.............................. 5-9

5.13 Overview.................................................................................................................. 5-9

5.14 Insurance................................................................................................................ 5-10

5.15 Sureties................................................................................................................... 5-10

5.16 Letters of Credit..................................................................................................... 5-10

5.17 Payment Procedures............................................................................................... 5-11

5.18 Contract Change Orders......................................................................................... 5-12

5.19 Modification of Maximum Amount Guaranteed During Construction ................. 5-12

5.20 Reporting During Construction Period .................................................................. 5-13

5.21 Final Payment ........................................................................................................ 5-14

5.22 Certification that Additional Requirements Have Been Met................................. 5-14

SECTION 4: APPLICATION PROCESSING FOR GUARANTEES ON 

CONSTRUCTION ADVANCES........................................................................................ 5-15

5.23 Overview of Process.............................................................................................. 5-15

SECTION 5: CLAIMS PROCESSING FOR 

GUARANTEES ON CONSTRUCTION ADVANCES.................................................... 5-15

5.24 Overview of Process.............................................................................................. 5-15

CHAPTER 6: PROGRAM FEES............................................................................................ 6-1

6.1 Overview.................................................................................................................. 6-1

6.2 Fees Associated with the Loan Guarantee ............................................................... 6-2

A. Initial Guarantee Fee......................................................................................... 6-2

B. Annual Guarantee Fee....................................................................................... 6-2

C. Surcharge for Guarantees on Construction Advances...................................... 6-2

6.3 Additional Agency Fees........................................................................................... 6-2

A. Application Fee................................................................................................. 6-2

B. Extension and Reopening Fees......................................................................... 6-3

C. Transfer of Ownership Fee ............................................................................... 6-3

CHAPTER 7: SERVICING PERMANENT LOANS ........................................................... 7-1

7.1 Introduction.............................................................................................................. 7-1

SECTION 1: SERVICING GOALS AND OBJECTIVES ............................................... 7-1

7.2 Objectives ................................................................................................................ 7-1

7.3 Protecting the Value of the Financial Asset............................................................. 7-1

7.4 Ensuring the Program Compliance .......................................................................... 7-2

7.5 Protecting the Tenants’ Rights................................................................................. 7-2

7.6 Protecting the Government’s Interests..................................................................... 7-2
HB-1-3565

Table of Contents

Page 9

SECTION 2: GENERAL SERVICING REQUIREMENTS............................................ 7-3

7.7 Funds Management.................................................................................................. 7-3

A. Collecting and Processing Borrower Payments................................................ 7-3

B. Escrow and Reserve Account Management ..................................................... 7-3

C. Interest Credit, if Applicable............................................................................. 7-3

D. Approval of Reserve Releases.......................................................................... 7-3

E. Approval of Surplus Cash Distribution to the Borrower .................................. 7-6

7.8 Addressing Defaults and Delinquencies.................................................................. 7-7

A. Delinquencies.................................................................................................... 7-8

B. Default............................................................................................................... 7-8

C. Declaring a Default........................................................................................... 7-8

D. Initiating Special Servicing............................................................................... 7-8

7.9 Transfer of Ownership ............................................................................................. 7-9

A. Changes in the Ownership Entity ..................................................................... 7-9

B. Transfers of Title/Transfers of Physical Assets................................................ 7-9

7.10 Transfer of Loans or Mortgage Servicing.............................................................. 7-10

SECTION 3: ASSET MANAGEMENT ............................................................................ 7-10

7.11 Overview................................................................................................................ 7-10

7.12 Financial Management........................................................................................... 7-10

A. Borrower Reports to the Lender ..................................................................... 7-10

B. Lender Reports to the Agency ........................................................................ 7-11

7.13 Completing the Capital Needs Assessment and Reserve Analysis........................ 7-14

A. The Capital Needs Assessment....................................................................... 7-14

B. Adjusting the Reserve Deposit Requirement.................................................. 7-15

7.14 Physical Maintenance and Program Compliance and Oversight........................... 7-15

A. Physical Standards and Inspections................................................................ 7-15

B. Capital Improvement Plans............................................................................. 7-16

C. Compliance with other Federal Requirements................................................ 7-16

D. Compliance with other Program Requirements.............................................. 7-19

(02-23-12) PN 455

Revised (05-19-16) PN 486
HB-1-3565

Table of Contents

Page 10

SECTION 4: SPECIAL SERVICING...................................................................... 7-21

7.15 Overview................................................................................................................ 7-21

7.16Roles and Responsibilities of the Servicing Lender ............................................... 7-21

A. Development of a Workout Plan..................................................................... 7-21

B. Bankruptcy of Borrower ................................................................................. 7-22

C. Loss Claims During Bankruptcy... ..................................................................7-22

7.17Roles and Responsibilities of the Borrower........................................................... 7-22

A. Submission of Information to the Lender......................................................... 7-22

B. Development and Execution of the Workout Plan........................................... 7-23

C. Compliance with the Workout Plan ................................................................. 7-23

7.18 Special Servicing Options...................................................................................... 7-23

A. Loan Modifications .......................................................................................... 7-23

B. Partial Payment of Claim ................................................................................. 7-23

C. Transfer of Physical Assets (TPA)................................................................... 7-24

D. Agency Approval of Reserve Releases............................................................ 7-24

E. Lender Recommendation of Enforcement Action............................................ 7-24

7.19 Loan Modification (Interest Rate Reduction)........................................................ 7-24

Attachment 7-A: GRRHP Lender Servicing Compliance Checklist

Attachment 7-B: Supplemental Government Auditing Standards Guide

CHAPTER 8: PROPERTY MANAGEMENT ...................................................................... 8-1

8.1 Introduction.............................................................................................................. 8-1

SECTION 1: ROLE OF LENDER IN PROPERTY MANAGEMENT........................... 8-1

8.2 Responsibilities of the Lender ................................................................................. 8-1

A. Management Plan.............................................................................................. 8-2

B. Property Manager Qualifications...................................................................... 8-2

C. Management Agreement................................................................................... 8-2

D. Site Visits.......................................................................................................... 8-2

E. Occupancy and Rent ......................................................................................... 8-2

F. Affirmative Fair Housing Marketing Plan........................................................ 8-2

G. Reporting........................................................................................................... 8-2

H. Relationship Reporting ..................................................................................... 8-3

I. Pre-Rent Up Instructions.................................................................................... 8-3

SECTION 2: MANAGEMENT PLAN....................................................................................8-4

8.3 Overview.................................................................................................................. 8-4
HB-1-3565

Table of Contents

Page 11

8.4 Management Plan Requirements ............................................................................. 8-4

A. Management Plan Contents .............................................................................. 8-4

B. Agency Review................................................................................................. 8-5

SECTION 3: PROPERTY MANAGER.............................................................................. 8-6

8.5 Overview.................................................................................................................. 8-6

8.6 Key Property Manager Issues.................................................................................. 8-6

8.7 Property Manager Experience.................................................................................. 8-7

8.8 Previous Participation and other Federal Requirements.......................................... 8-8

SECTION 4: MANAGEMENT AGREEMENT................................................................. 8-8

8.9 Overview.................................................................................................................. 8-8

8.10 Terms and Conditions.............................................................................................. 8-8

8.11 Management Fee...................................................................................................... 8-9

SECTION 5: OCCUPANCY REQUIREMENTS ............................................................. 8-9

8.12 Occupancy Requirements and Lender Review........................................................ 8-9

A. Income of Residents.......................................................................................... 8-9

B. Tenant Income Certifications............................................................................ 8-9

C. GRRHP Definition of Income ........................................................................ 8-10

D. Reporting of Income ....................................................................................... 8-10

E. Restrictions on Rent........................................................................................ 8-11

F. Use Restrictions.............................................................................................. 8-11

SECTION 6: TENANT PROTECTION AND GRIEVANCE PROCEDURES........... 8-12

8.13 Overview................................................................................................................ 8-12

8.14 Tenant Protection................................................................................................... 8-12

8.15 Grievance Procedures ............................................................................................ 8-12

8.16 Civil Rights............................................................................................................ 8-14

A. Lender Obligations........................................................................................... 8-14

B. Penalties............................................................................................................ 8-15

8.17 Housing Discrimination........................................................................................ 8-15

Attachment 8-A: Management Plan Requirements for the Guaranteed Rural Rental

 Housing Program

Attachment 8-B: The Hearing Process for Tenant Grievances and Appeals

 for the Guaranteed Rural Rental Housing Program

(02-23-12) PN 455 

Revised (07-21-23) PN 588
HB-1-3565

Table of Contents

Page 12

CHAPTER 9: INSURANCE REQUIREMENTS.................................................................. 9-1

9.1 Introduction .............................................................................................................. 9-1

SECTION 1: OVERVIEW OF INSURANCE REQUIREMENTS .................................. 9-1

9.2 Overview.................................................................................................................. 9-1

SECTION 2: TYPES OF INSURANCE............................................................................. 9-1

9.3 Property Insurance ................................................................................................... 9-1

9.4 Fidelity Insurance..................................................................................................... 9-2

9.5 Mortgage’s Errors and Omissions (E&O) Insurance............................................... 9-2

9.6 Liability Insurance ................................................................................................... 9-3

9.7 Worker’s Compensation .......................................................................................... 9-3

9.8 Evidence of Insurance, Terms, and Coverage ......................................................... 9-3

SECTION 3: AUTHORIZED INSURANCE PROVIDERS ............................................. 9-3

9.9 Overview.................................................................................................................. 9-3

9.10 Acceptable Ratings for Insurance Providers............................................................ 9-3

CHAPTER 10: CLAIMS......................................................................................................... 10-1

10.1 Purpose and Overview........................................................................................... 10-1

SECTION 1: PRE-LIQUIDATION REQUIREMENTS ................................................. 10-2

10.2 Overview................................................................................................................ 10-2

SECTION 2: DECISION TO LIQUIDATE...................................................................... 10-2

10.3 Overview................................................................................................................ 10-2

10.4 Notice of Liquidation and Potential Claim............................................................ 10-3

10.5 Submission of a Liquidation Plan.......................................................................... 10-3

10.6 Approval of Liquidation Plan ................................................................................ 10-5

10.7 Filing an Estimated Loss Claim............................................................................. 10-5

10.8 Withdrawal of a Claim........................................................................................... 10-6

SECTION 3: PROPERTY LIQUIDATION .................................................................... 10-6

10.9 Property Acquisition .............................................................................................. 10-6

10.10 Lender Liquidation............................................................................................... 10-7

10.11 Failure to Comply with the Liquidation Plan ...................................................... 10-7

SECTION 4: AGENCY ELECTION OF ASSIGNMENT OR CONVEYANCE.......... 10-7

10.12 Overview.............................................................................................................. 10-7

10.13 Assignment of the Loan....................................................................................... 10-8

10.14 Conveyance of Title to the Agency ..................................................................... 10-8
HB-1-3565

Table of Contents

Page 13

SECTION 5: DETERMINATION OF THE CLAIM AMOUNT................................... 10-9

10.15 Introduction.......................................................................................................... 10-9

10.16 Determination of the Date of Loss..................................................................... 10-10

A. Lender Liquidation ...................................................................................... 10-10

B. Assignment or Conveyance of Title to the Agency .................................... 10-10

10.17 Calculation of Loss............................................................................................ 10-10

A. Request for Estimated Loss Claim.............................................................. 10-10

B. Final Report of Loss.................................................................................... 10-11

10.18 Protective Advances........................................................................................... 10-11

10.19 Liquidation Expenses......................................................................................... 10-11

10.20 Legal Expenses During Bankruptcy Proceedings.............................................. 10-11

10.21 Maximum Guarantee Payment .......................................................................... 10-12

SECTION 6: PAYMENT OF THE FINAL CLAIM...................................................... 10-12

10.22 Overview............................................................................................................ 10-12

10.23 Submission of a Report of Final Loss................................................................ 10-12

10.24 The Approved Claim Amount ........................................................................... 10-13

CHAPTER 11: ENVIRONMENTAL REQUIREMENTS ................................................. 11-1

11.1 Purpose and Overview........................................................................................... 11-1

11.2 General Environmental Requirements................................................................... 11-1

11.3 Environmental Risk Management.......................................................................... 11-3

11.4 Responsibility for Environmental Reviews........................................................... 11-4

11.5 Environmental Reviews During Loan Origination................................................ 11-5

A. The Response to the Notice Stage.................................................................... 11-5

B. The Application Submission Stage .................................................................. 11-5

11.6 Environmental Reviews During the Servicing Period........................................... 11-7

11.7 Other Environmental Requirements ...................................................................... 11-7

A. Flood Hazard Determination............................................................................ 11-7

B. Clean Air Act and Water Pollution Control Act .............................................. 11-8

CHAPTER 12: SECONDARY MARKET ............................................................................ 12-1

12.1 Purpose and Overview........................................................................................... 12-1

SECTION 1: TRANSFER TO SECONDARY MARKETS ............................................ 12-1

12.2 Holder Versus Participant...................................................................................... 12-1

(02-23-12) PN 455

Revised (11-15-19) PN 531
HB-1-3565

Table of Contents

Page 14

12.3 Transfer to the Secondary Market.......................................................................... 12-2

A. Loan Requirements for Sale on the Secondary Market ................................... 12-2

B. Agency Execution of Form RD 3565-5, Assignment Guarantee Agreement.. 12-3

C. Loans Involving Ginnie Mae, Freddie Mac and Fannie Mae .......................... 12-4

SECTION 2: REPURCHASE FROM A SECONDARY MARKET HOLDER............ 12-4

12.4 Holder Demand Repurchase .................................................................................. 12-4

12.5 Lender Initiated Repurchase .................................................................................. 12-5

12.6 Demand Repurchase of Loans Contained in a Ginnie Mae Pool........................... 12-5

12.7 Purchase of the Loan or Note by the Agency ........................................................ 12-5

A. Agency Purchase from the Holder .................................................................. 12-5

B. Agency Purchase of Loans Contained in Ginnie Mae Pools ........................... 12-7

12.8 Servicing Fees........................................................................................................ 12-8

GLOSSARY

APPENDIX 1: 7 CFR PART 3565

APPENDIX 2: LIST OF FORMS