42618 Federal Register / Vol. 83, No. 164 / Thursday, August 23, 2018 / Proposed Rules 

when the requirements of paragraphs 

(b)(i) and (ii) are satisfied and any 

commercial interest is not the primary 

interest furthered by the request. OMB 

ordinarily will presume that when a 

news media requester has satisfied 

factors (i) and (ii) above, the request is 

not primarily in the commercial interest 

of the requester. Disclosure to data 

brokers or others who merely compile 

and market government information for 

direct economic return will not be 

presumed to primarily serve the public 

interest. 

(c) Timing of requests for fee waivers. 

Requests for a waiver or reduction of 

fees should be made when the request 

is first submitted to OMB and should 

address the criteria referenced above. A 

requester may submit a fee waiver 

request at a later time so long as the 

underlying record request is pending or 

on administrative appeal. When a 

requester who has committed to pay 

fees subsequently asks for a waiver of 

those fees and that waiver is denied, the 

requester shall be required to pay any 

costs incurred up to the date the fee 

waiver request was received. 

Dated: August 17, 2018. 

Mark R. Paoletta, 

General Counsel and Chief FOIA Officer. 

[FR Doc. 2018–18061 Filed 8–22–18; 8:45 am] 

BILLING CODE 3110–01–P 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 3555 

RIN 0575–AD09 

Single Family Housing Guaranteed 

Loan Program 

AGENCY: Rural Housing Service, USDA. 

ACTION: Proposed rule. 

SUMMARY: The Rural Housing Service 

(RHS or Agency) proposes to make 

several changes to the single-family 

housing guaranteed loan program 

(SFHGLP) regulations to streamline the 

loss claim process for lenders who have 

acquired title to property through 

voluntary liquidation or foreclosure; 

clarify that lenders must comply with 

applicable laws, including those within 

the purview of the Consumer Financial 

Protection Bureau; and better align loss 

mitigation policies with those in the 

mortgage industry. 

DATES: Written or email comments on 

the proposed rule must be received on 

or before October 22, 2018 to be assured 

for consideration. 

ADDRESSES: You may submit comments 

on this proposed rule by any one of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Submit written comments via 

the U.S. Postal Service to the Branch 

Chief, Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, STOP 0742, 1400 

Independence Ave. SW, Washington, 

DC 20250–0742. 

• Hand Delivery/Courier: Submit 

written comments via Federal Express 

mail, or other courier service requiring 

a street address to the Branch Chief, 

Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, 1400 Independence Ave. 

SW, Washington, DC 20250. 

All written comments will be 

available for public inspection during 

regular work hours at the 1400 

Independence Ave. SW, address listed 

above. 

FOR FURTHER INFORMATION CONTACT: Kate 

Jensen, Finance and Loan Analyst, 

Single Family Housing Guaranteed Loan 

Division, STOP 0784, Room 2250, 

USDA Rural Development, South 

Agriculture Building, 1400 

Independence Avenue SW, Washington, 

DC 20250–0784, telephone: (503) 894– 

2382, email is Kate.Jensen@

wdc.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866, Classification 

This proposed rule has been 

determined to be non-significant and, 

therefore was not reviewed by the Office 

of Management and Budget (OMB) 

under Executive Order 12866. 

Executive Order 12988, Civil Justice 

Reform 

This proposed rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. Except where specified, 

all State and local laws and regulations 

that are in direct conflict with this rule 

will be preempted. Federal funds carry 

Federal requirements. No person is 

required to apply for funding under 

SFHGLP, but if they do apply and are 

selected for funding, they must comply 

with the requirements applicable to the 

Federal program funds. This proposed 

rule is not retroactive. It will not affect 

agreements entered prior to the effective 

date of the rule. Before any judicial 

action may be brought regarding the 

provisions of this rule, the 

administrative appeal provisions of 7 

CFR part 11 must be exhausted. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA), Public 

Law 104–4, establishes requirements for 

Federal agencies to assess the effect of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. Under section 202 of the UMRA, 

the Agency generally must prepare a 

written statement, including a costbenefit analysis, for proposed and final 

rules with ‘‘Federal mandates’’ that may 

result in expenditures to State, local, or 

tribal governments, in the aggregate, or 

to the private sector, of $100 million, or 

more, in any one year. When such a 

statement is needed for a rule, section 

205 of the UMRA generally requires the 

Agency to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the least costly, 

most cost-effective, or least burdensome 

alternative that achieves the objectives 

of the rule. 

This proposed rule contains no 

Federal mandates (under the regulatory 

provisions of Title II of the UMRA) for 

State, local, and tribal governments or 

the private sector. Therefore, this rule is 

not subject to the requirements of 

sections 202 and 205 of the UMRA. 

Environmental Impact Statement 

This document has been reviewed in 

accordance with 7 CFR part 1970, 

subpart G, ‘‘Environmental Program.’’ It 

is the determination of the Agency that 

this action does not constitute a major 

Federal action significantly affecting the 

quality of the human environment, and, 

in accordance with the National 

Environmental Policy Act of 1969, 

Public Law 91–190, neither an 

Environmental Assessment nor an 

Environmental Impact Statement is 

required. 

Executive Order 13132, Federalism 

The policies contained in this rule do 

not have any substantial direct effect on 

States, on the relationship between the 

national government and States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Nor does this rule 

impose substantial direct compliance 

costs on State and local governments. 

Therefore, consultation with the States 

is not required. 

Regulatory Flexibility Act 

In compliance with the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.) the 

undersigned has determined and 

certified by signature of this document 

that this rule change will not have a 

significant impact on a substantial 

number of small entities. This rule does 

not impose any significant new 


daltland on DSKBBV9HB2PROD with PROPOSALS
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requirements on Agency applicants and 

borrowers, and the regulatory changes 

affect only Agency determination of 

program benefits for guarantees of loans 

made to individuals. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 imposes 

requirements on RHS in the 

development of regulatory policies that 

have Tribal implications or preempt 

tribal laws. RHS has determined that the 

proposed rule does not have a 

substantial direct effect on one or more 

Indian Tribe(s) or on either the 

relationship or the distribution of 

powers and responsibilities between the 

Federal Government and Indian Tribes. 

Thus, this proposed rule is not subject 

to the requirements of Executive Order 

13175. If a tribe determines that this 

rule has implications of which RHS is 

not aware and would like to engage with 

RHS on this rule, please contact USDA’s 

Native American Coordinator at (720) 

544–2911 or AIAN@wdc.usda.gov. 

Executive Order 12372, 

Intergovernmental Consultation 

These loans are subject to the 

provisions of Executive Order 12372, 

which require intergovernmental 

consultation with State and local 

officials. RHS conducts 

intergovernmental consultations for 

each SFHGLP in accordance with 2 CFR 

part 415, subpart C. 

Programs Affected 

The program affected by this 

regulation is listed in the Catalog of 

Federal Domestic Assistance under 

Number 10.410, Very Low to Moderate 

Income Housing Loans (Section 502 

Rural Housing Loans). 

Paperwork Reduction Act 

The information collection and record 

keeping requirements contained in this 

regulation have been approved by OMB 

in accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

Chapter 35). The assigned OMB control 

number is 0575–0179. 

E-Government Act Compliance 

The Agency is committed to 

complying with the E-Government Act, 

to promote the use of the internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. 

Non-Discrimination Policy 

In accordance with Federal civil 

rights law and U.S. Department of 

Agriculture (USDA) civil rights 

regulations and policies, the USDA, its 

Agencies, offices, and employees, and 

institutions participating in or 

administering USDA programs are 

prohibited from discriminating based on 

race, color, national origin, religion, sex, 

gender identity (including gender 

expression), sexual orientation, 

disability, age, marital status, family/ 

parental status, income derived from a 

public assistance program, political 

beliefs, or reprisal or retaliation for prior 

civil rights activity, in any program or 

activity conducted or funded by USDA 

(not all bases apply to all programs). 

Remedies and complaint filing 

deadlines vary by program or incident. 

Persons with disabilities who require 

alternative means of communication for 

program information (e.g., Braille, large 

print, audiotape, American Sign 

Language, etc.) should contact the 

responsible Agency or USDA’s TARGET 

Center at (202) 720–2600 (voice and 

TTY) or contact USDA through the 

Federal Relay Service at (800) 877–8339. 

Additionally, program information may 

be made available in languages other 

than English. 

To file a program discrimination 

complaint, complete the USDA Program 

Discrimination Complaint Form, AD– 

3027, found online at http://

www.ascr.usda.gov/complaint_filing_

cust.html and at any USDA office or 

write a letter addressed to USDA and 

provide in the letter all of the 

information requested in the form. To 

request a copy of the complaint form, 

call (866) 632–9992. Submit your 

completed form or letter to USDA by: 

(1) Mail: U.S. Department of 

Agriculture, Office of the Assistant 

Secretary for Civil Rights, 1400 

Independence Avenue SW, Washington, 

DC 20250–9410; 

(2) Fax: (202) 690–7442; or 

(3) Email: program.intake@usda.gov. 

USDA is an equal opportunity 

provider, employer, and lender. 

Background Information 

Driven by tight credit markets in 

which lenders are reluctant to make 

mortgage loans without insurance or 

guarantees from the federal government, 

SFHGLP has grown significantly in 

recent fiscal years (FY); from $33 

million in loans in 1991 to $19.2 billion 

in FY 2017. The total portfolio of the 

SFHGLP consists of over one million 

loans serviced by over 1,000 lenders. 

The expansion of the program has led 

the Agency to look for ways in which 

current policies and procedures can be 

revised to streamline the program, align 

the Agency with industry practices, and 

balance Agency resources with program 

demand. In order to help achieve these 

objectives, this rule proposes various 

changes to the loss claim process and 

loss mitigation loan servicing. 

I. Loss Claims 

When a borrower stops making loan 

payments and goes into default, lenders 

are required to contact the borrower at 

prescribed intervals to offer various loss 

mitigation options to continue with the 

loan, come to an agreement to selfliquidate, or transfer the property to the 

lender through a deed-in-lieu. If these 

loss mitigation activities are 

unsuccessful, the lender will proceed to 

foreclosure where the property is sold to 

a third party or acquired into the 

lender’s real estate owned (REO) 

portfolio. After sale of the property at 

the foreclosure sale or from the lender’s 

REO, those proceeds are applied to the 

account. If that amount cannot satisfy 

the account, the lender submits a loss 

claim to the Agency using a web-based 

automated system or in a paper format. 

Upon payment of the loss claim 

payment to the lender, the Agency has 

satisfied its obligation to the lender 

under the loan guarantee. 

When a lender acquires title to a 

property (i.e., REO), the Agency requires 

an REO property disposition plan from 

the lender explaining how, among other 

things, the lender will maintain and 

market the property during the 

permissible marketing period. The 

lender must obtain Agency concurrence 

for any significant changes to the plan. 

Currently, the Agency provides two 

opportunities for the lender to file a loss 

claim on REO property: When the 

property sells during the permissible 

marketing period, or after the 

permissible marketing period (typically 

9 or 12 months) if the REO property 

does not sell. 

If the property has sold during the 

permissible marketing period, the loss 

claim is paid based on the actual 

property sales price combined with the 

actual property liquidation, property 

preservation, and disposition costs. If 

the property remains unsold after the 

permissible marketing period, the loss 

claim is based upon a liquidation value 

real estate appraisal and preservation 

and disposition costs consistent with 

the most currently published U.S. 

Department of Veterans Affairs (VA) 

Management and Acquisition Factor 

(VA Net Value Factor) found at https:// 

www.benefits.va.gov/HOMELOANS/ 

servicers_valeri.asp. When a lender 

receives a loss claim payment on unsold 


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REO, they are responsible to report the 

future sale of the property and pay 

future recovery if the sales price is 

greater than the liquidation value real 

estate appraisal amount. The proceeds 

are distributed so that the total loss to 

the Agency is equivalent to the loss that 

would have been incurred had the 

recovered amount been included in the 

initial loss calculation. 

The Agency proposes changes to the 

loss claim payment process when a 

lender acquires title by way of a deedin-lieu or foreclosure sale. Under the 

proposed framework, lenders who 

acquire title must order a market value 

appraisal for the REO property within 

15 days of acquiring title to the 

property. The loss claim request must be 

submitted to the Agency within 45 days 

upon receipt of the appraisal. The 

Agency will employ a loss claim model 

that takes into consideration various 

factors, including the market value 

appraisal, as well as property 

preservation and disposition costs based 

on the VA Management and Acquisition 

Factor costs consistent with the most 

currently published U.S. Department of 

Veterans Affairs (VA) Management and 

Acquisition Factor (VA Net Value 

Factor) found at https://www.benefits.

va.gov/HOMELOANS/servicers_

valeri.asp to determine the loss claim 

amount. Because loss claims will be 

paid after acquisition and prior to 

marketing the REO, this will eliminate 

the need for REO property disposition 

plans, different loss claim calculations 

based on whether the property has sold 

or remains in the lender’s REO portfolio, 

and claim adjustments based on future 

recovery. To reflect this more 

streamlined approach to loss claim 

processing that should deliver loss 

claim payments to lenders in a timelier 

fashion, the Agency will limit the lender 

to 60 days of additional interest during 

the loss claim period. 

The Agency also proposes to revise 7 

CFR 3555.354, which allows lenders to 

submit a loss claim electronically or in 

paper format. The change will require 

all lenders to utilize a web-based system 

to submit loss claims to reduce 

paperwork burden to both lenders and 

the Agency. 

The Agency proposes to revise the 

definition of the settlement date to add 

the settlement date for deed-in-lieu 

actions. The Agency will define the 

settlement date of the deed-in-lieu as 

the date title is recorded. The current 

version of the regulation is silent on this 

issue. 

These proposed changes were 

recommended by a Lean Six Sigma task 

force that consisted of Agency staff and 

lenders. Lean Six Sigma is a 

methodology used to improve 

performance and streamline processes 

by defining, measuring, analyzing, 

improving, and controlling problems or 

issues. The Lean Six Sigma task force 

was established to develop solutions on 

improving the loss claim process, while 

also making the SFGHLP cost-effective 

and efficient. Benefits of the proposed 

loss claim process to the lender include: 

A faster claim resolution by elimination 

of the 9- and 12 month marketing 

periods; a simplified claim submission 

due to elimination of requirement to 

submit invoices, system notes, financial 

history, listing agreement, Closing 

Disclosure and other information 

applicable to the marketing period; 

elimination of the property disposition 

plan; and efficient disposition of REO 

properties due to the elimination of 

agency approval required for offers, 

repair bids or valuations. Benefits to the 

Agency include: A reduction of REO 

claim processing time to 1.5–4 hours per 

claim from 3–6 hours per claim 

resulting in an annual savings of 26,728 

staff hours or $927,000 in annual labor 

costs; elimination of property 

disposition plans resulting in a savings 

of 14,492 hours or $503,000 in annual 

labor costs; reduction of improper 

payment risk by eliminating 

consideration of actual expenditure 

activity within the marketing period; 

simplification and streamlining of 

compliance reviews by eliminating all 

post-foreclosure activity on REO claims; 

reduction of interest paid by 30 days per 

REO claim resulting in annual interest 

savings of $3.7 million (based on FY 

2014 REO claim payments). The 

proposed change will not impact 

borrowers. 

II. General Lender Requirement 

The Agency is proposing to amend 7 

CFR 3555.51(b)(1) to clarify that in 

addition to complying with Agency 

laws and guidance, lenders must 

comply with other applicable federal, 

state and local laws, including those 

that fall under the purview of the 

Consumer Financial Protection Bureau, 

such as the Real Estate Settlement 

Procedures Act and the Truth in 

Lending Act. 

III. Loss Mitigation 

In November of 2015, the Department 

of Treasury hosted a summit attended 

by federal agencies, mortgage lenders, 

consumer groups, investors, and 

mortgage service providers to discuss 

the future of loss mitigation pending the 

expiration of the Home Affordable 

Modification Program (HAMP) in 

December 2016. An important takeaway from the summit was HAMP data 

showing payment reduction was key to 

a borrower’s loss mitigation success. 

Borrowers facing financial hardship are 

unable to retain their home if the 

modified payment remains equal or 

exceeds their current promissory note 

installment. 

The proposed changes regarding loss 

mitigation procedures, described below, 

would continue the Agency’s efforts to 

improve the effectiveness of loss 

mitigation by emphasizing payment 

reduction as the key component to any 

relief provided to the borrower while 

offering lenders and borrowers 

consistent loss mitigation policies that 

align with industry standard. 

The proposed changes will offer 

borrowers faster and greater payment 

relief early in the loss mitigation 

process. Historically, borrowers who 

receive less than 10 percent payment 

reduction have re-defaulted at a rate 

greater than 60 percent. When at least a 

10 percent payment reduction is 

achieved, the re-default rate is reduced 

by half. These changes would increase 

homeownership success and decrease 

foreclosures. The Agency expects a 

corresponding reduction in lenderowned property resulting in greater 

community stability, as well as 

decreasing the expenses associated with 

foreclosure and property disposition. 

A. Agency Concurrence on Servicing 

Plans and Voluntary Liquidation 

Currently, lenders must obtain 

Agency concurrence for a formal 

servicing plan or voluntary liquidation 

prior to implementation with the 

borrower. The Agency may grant 

lenders a waiver for concurrence. 

The Agency proposes to amend the 

regulation to eliminate the requirement 

for Agency concurrence on formal 

servicing plans and voluntary 

liquidation. The proposed change 

would streamline the servicing plan and 

voluntary liquidation process for 

lenders and borrowers. Lenders would 

still report to the Agency any servicing 

plans and voluntary liquidation options 

that have been adopted, but Agency 

concurrence will not be necessary 

beforehand. While Agency concurrence 

for these actions will not be necessary, 

lenders will still be accountable for 

servicing plans and voluntary 

liquidation actions. The Agency will set 

performance benchmarks, monitor 

lender performance, and implement any 

necessary corrective action plans. 

Performance benchmarks will include 

rates for delinquency, foreclosure, and 

loss claim. 

Lender performance regarding loss 

mitigation servicing plans and voluntary 

liquidation will be captured by the 


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Agency’s existing quality control (QC) 

process that incorporates a set of 

questions and findings for a sample of 

files submitted by the lender during a 

specific time. Findings are recorded and 

reported back to the lender along with 

any suggestions for improvement. 

In addition, the Agency already 

reviews lenders on a regular basis for 

compliance with Agency requirements, 

and will reflect lenders’ implementation 

of loss mitigation servicing plans and 

voluntary liquidation. Lender 

compliance reviews focus on the 

lender’s adherence to Agency 

requirements and continuing eligibility 

for the program based on the results of 

individual file reviews. Lenders are 

provided a report of any findings and 

given an opportunity to correct issues. 

Lenders that are determined to be out 

of compliance through Agency QC or 

compliance reviews will be counseled, 

offered training, and given the 

opportunity to improve. Lenders that 

show little or no progress could be 

subject to enhanced oversight during the 

loss claim process. 

The Agency believes that eliminating 

the need for Agency concurrence for 

these actions will reduce the number of 

approval steps within the process and 

provide assistance to borrowers more 

quickly and balance Agency resources 

against demands. In addition, the 

change will align Agency policy with 

other loan guarantee programs that do 

not require a case-by-case review and 

rely on regular QC, lender compliance 

reviews, and data to determine lender 

performance and compliance with 

regulations. 

To conform with the above changes, 

the Agency proposes to eliminate 

references to mandatory Agency 

concurrence from 3555.302 regarding 

protective advances and 3555.305 

regarding voluntary liquidation. 

B. Trial Plan (Traditional Servicing 

Loan Modification) 

Pursuant to 7 CFR 3555.303(b)(3)(v) 

borrowers may not be required to 

complete a trial plan in order to be 

eligible for a traditional servicing loan 

modification. The Agency proposes to 

amend this requirement and provide 

flexibility to lenders to determine 

whether a trial period is warranted for 

a traditional servicing loan 

modification. 

C. Mortgage Recovery Advance 

Lenders may use special servicing 

options to bring a borrower’s mortgage 

payment to an income ratio as close as 

possible to 31 percent. If the borrower 

cannot reach the targeted payment with 

an extended term loan modification of 

interest rate and loan term under 

3555.304(c), the lender may utilize a 

Mortgage Recovery Advance (MRA) 

under 3555.304(d). 

The Agency proposes to amend the 

language to standardize many of the 

requirements of special servicing 

options to increase the opportunity and 

effectiveness of lender assistance to 

borrowers facing an involuntary 

inability to pay their mortgage. 

The Agency proposes to allow a 

‘‘stand-alone’’ MRA when a borrower 

faced a hardship but is now able to 

continue making payments under the 

promissory note rate and terms but 

cannot cure the delinquency with 

personal funds. Currently, the 

regulation does not provide a solution 

for this scenario. The Agency has 

received feedback from stakeholders 

that a stand-alone MRA in certain 

circumstances would be an effective 

tool to facilitate borrower’s long-term 

repayment ability. The proposed standalone MRA would be permitted when 

the borrower’s mortgage payment to 

income ratio is less than 31 percent. For 

other borrowers, the existing 

requirement to use special servicing 

options in the order they appear in 

3555.304 would remain. 

The regulation is currently silent on 

how the servicer should treat the 

capitalization of the delinquency when 

using special servicing options. In 

comparison, traditional servicing 

options direct the lender through 

specific steps to capitalize all or a 

portion of the arrearage (PITI). 

Capitalization may also include 

foreclosure fees and costs, tax and 

insurance advances, past due Agency 

annual fees imposed by the lender, but 

not late charges or lender fees. Allowing 

the lender to capitalize the delinquency 

and these other amounts creates a 

clearer path to borrower success. 

The Agency proposes to remove the 

maximum limit of 12 months PITI when 

calculating the MRA maximum amount 

and the requirement that the lender 

reduce the maximum MRA by the sum 

of the arrearages advanced to cure the 

default and any foreclosure costs 

incurred to that point. The servicing 

industry uses a standard ‘‘waterfall’’ 

method where the first step is to 

capitalize the delinquency, defined as 

PITI, annual fees, legal fees, and 

foreclosure costs. The lender then 

considers changes to the interest rate 

and term extension. By focusing on the 

limit of 30 percent of the unpaid 

principal balance, the changes would 

simplify the MRA calculation and 

increase the chances of the borrower 

becoming and remaining current. In 

addition, removal of the 12-month 

maximum PITI will bring the Agency in 

line with other federal programs and 

industry standards. 

List of Subjects in 7 CFR Part 3555 

Home improvement, Loan Programs— 

Housing and community development, 

Mortgage insurance, Mortgages, Rural 

areas. 

Therefore, chapter XXXV, title 7 of 

the Code of Federal Regulations is 

proposed to be amended as follows: 

PART 3555—GUARANTEED RURAL 

HOUSING PROGRAM 

■ 1. The authority citation for part 3555 

continues to read as follows: 

Authority: 5 U.S.C. 301; 42 U.S.C. 1471 et 

seq. 

■ 2. Amend § 3555.10 in the definition 

of Settlement date by revising the 

introductory text and adding paragraph 

(5) to read as follows: 

§ 3555.10 Definitions and abbreviations. 

* * * * * 

Settlement date. The settlement date, 

for the purpose of loss calculation, is: 

* * * * * 

(5) The date title is acquired upon 

recordation of a deed-in-lieu of 

foreclosure, with prior approval of the 

lender. 

* * * * * 

■ 3. Amend § 3555.51 (b)(1) by adding 

a new sentence after the first sentence 

to read as follows: 

§ 3555.51 Lender eligibility. 

* * * * * 

(b) * * * 

(1) * * * Lenders must also comply 

with all other applicable federal, state 

and local laws, rules and requirements, 

including those under the purview of 

the Consumer Financial Protection 

Bureau, such as the Real Estate 

Settlement Procedures Act and the 

Truth in Lending Act. * * * 

* * * * * 

■ 4. Amend § 3555.301 by revising 

paragraph (h) to read as follows: 

§ 3555.301 General servicing techniques. 

* * * * * 

(h) Formal servicing plan. The lender 

must report to the Agency utilizing a 

web-based automated system a formal 

servicing plan when a borrower’s 

account is 90 days or more delinquent 

and a method other than foreclosure is 

recommend to solve the delinquency. 

■ 5. Amend § 3555.302 by revising 

paragraph (b) to read as follows: 

§ 3555.302 Protective advances. 

* * * * * 


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(b) Advances for costs other than 

taxes and insurance. Protective 

advances for costs other than taxes and 

insurance, such as emergency repairs, 

can be made only if the borrower 

cannot, or will not, obtain an additional 

loan or reimbursement from an insurer 

or the borrower has abandoned the 

property. The lender must determine 

that any repairs funded by protective 

advances are cost effective. Repairs 

funded by protective advances must be 

planned, performed and inspected in 

accordance with § 3555.202 and as 

further described by the Agency. The 

lender must obtain prior Agency 

concurrence before issuing protective 

advances under this paragraph only for 

protective advances of a significant 

amount as specified by the Agency. 

■ 6. Amend § 3555.303 by revising 

paragraph (b)(3)(v) to read as follows: 

§ 3555.303 Traditional servicing options. 

* * * * * 

(b) * * * 

(3) * * * 

(v) Lenders may require that 

borrowers complete a trial payment plan 

prior to making scheduled payments 

amended by the traditional loan 

servicing loan modification. 

* * * * * 

■ 7. Amend § 3555.304 by removing and 

reserving paragraph (a)(2), revising 

paragraph (a)(4), revising paragraphs 

(c)(1)and (2), and revising paragraphs 

(d)(2) and (3) to read as follows: 

§ 3555.304 Special servicing options. 

(a) * * * 

(2) [Reserved] 

* * * * * 

(4) If the borrower currently has a 

mortgage payment to income ratio lower 

than 31 percent, special servicing 

options can be utilized to cure the 

delinquency without modifying the 

note. Otherwise, special servicing 

options shall be used in the order 

established in this section to bring the 

borrower’s mortgage payment to income 

ratio as close as possible to, but not less 

than, 31 percent. 

* * * * * 

(c) * * * 

(1) Loan modifications may capitalize 

all or a portion of the arrearage (PITI) 

and/or reamortization of the balance 

due. Capitalization may also include 

foreclosure fees and costs, tax and 

insurance advances, past due annual 

fees imposed by the lender, but not late 

charges or lender fees. 

(2) Loan modifications must be a fixed 

interest rate and cannot exceed the 

current market interest rate at the time 

of modification. When reducing the 

interest rate, the maximum rate is 

subject to paragraph (c)(3) of this 

section. 

(d) * * * 

(2) The maximum amount of a 

mortgage recovery advance is 30 percent 

of the unpaid principal balance as of the 

date of default. The Agency may change 

the maximum amount of mortgage 

recovery advance by publication in the 

Federal Register. 

(3) If the borrower’s total monthly 

mortgage payment is less than 31 

percent of gross monthly income prior 

to an extended term loan modification, 

the mortgage recovery advance can be 

used as a stand-alone option to cure the 

borrower’s delinquency without 

changing the terms of the note. 

* * * * * 

■ 8. Amend § 3555.305 by revising the 

introductory text to read as follows: 

§ 3555.305 Voluntary liquidation. 

The lender must have exhausted the 

servicing options outlined in 

§§ 3555.302 through 3555.304 to cure 

the delinquency before considering 

voluntary liquidation. The methods of 

voluntary liquidation of the security 

property outlined in this section may be 

used to protect the interests of the 

Government. 

* * * * * 

■ 9. Amend § 3555.306 by revising 

paragraph (f) to read as follows: 

§ 3555.306 Liquidation. 

* * * * * 

(f) Lender acquisition of title. If at 

liquidation, the title to the property is 

conveyed to the lender, the lender will 

order a market value appraisal within 15 

days of acquiring title. The appraisal 

must be completed by an appraiser to be 

used to pay the loss claim using a 

calculated value as provided by a 

model. The lender must submit the 

appraisal with a loss claim request in 

accordance with subpart H. 

* * * * * 

■ 10. Amend § 3555.352 by revising 

paragraphs (c) and (e) to read as follows: 

§ 3555.352 Loss covered by the guarantee. 

* * * * * 

(c) Additional interest. Additional 

interest on the unsatisfied principal 

accrued from the settlement date to the 

date the claim is paid, but not more than 

60 days from the settlement date; 

* * * * * 

(e) Liquidation costs. Reasonable and 

customary liquidation costs, such as 

attorney fees, market value appraisals, 

and foreclosure costs. Annual fees 

advanced by the lender to the Agency 

are ineligible for reimbursement when 

calculating the loss claim payment. 

■ 11. Amend § 3555.353 by revising 

paragraphs (a) introductory text and (b) 

to read as follows: 

§ 3555.353 Net recovery value. 

* * * * * 

(a) For a property that has been sold. 

When a loss claim is filed on a property 

that was sold to a third party at the 

foreclosure sale or through an approved 

pre-foreclosure sale, net recovery value 

is calculated as follows: 

* * * * * 

(b) For a property that has been 

acquired. When a loss claim is filed on 

a property acquired by the lender 

through a foreclosure sale or deed-inlieu of foreclosure, net recovery value is 

based on an estimated sales price 

calculated using the market value, 

holding and disposition costs calculated 

using an acquisition and management 

factor published by the VA, and other 

factors as determined by the Agency. 

The lender must order the appraisal 

within 15 days of acquiring title to the 

property, and submit the appraisal with 

any loss claim request in accordance 

with subpart H of this part. 

■ 12. Amend § 3555.354 by revising the 

introductory text and paragraph (b) to 

read as follows: 

§ 3555.354 Loss claim procedures. 

All lenders must use a web-based 

automated system designated by the 

Agency to submit all loss claim 

requests. 

* * * * * 

(b) REO. When the lender acquires 

title to the property, the lender must 

order a market value appraisal within 15 

days of acquiring title. The lender must 

submit a complete loss claim package 

that includes the completed market 

value appraisal within 45 calendar days 

of receiving the appraisal. Loss claims 

submitted beyond this period of time, or 

submitted without an appraisal may be 

rejected or reduced by Rural 

Development. The Agency will apply an 

acquisition and management resale 

factor to estimate holding and 

disposition costs, based on the most 

current VA Management and 

Acquisition Factor found at https://

www.benefits.va.gov/HOMELOANS/ 

servicers_valeri.asp. 

* * * * * 

§ 3555.356 [Removed] 

■ 13. Remove § 3555.356. 

Dated: July 27, 2018. 

Joel C. Baxley, 

Administrator, Rural Housing Service. 

[FR Doc. 2018–18089 Filed 8–22–18; 8:45 am] 

BILLING CODE 3410–XV–P 


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