USDA: Final Rule: Loss Claim and Loss Mitigation
December 26, 2019
The Rural Housing Service (RHS or Agency) published a proposed rule on August 23, 2018, proposing to implement changes to the Single Family Housing Guaranteed loan program (SFHGLP) regulation 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, and better align loss mitigation policies with the mortgage industry. The final rule was published in the Federal Register on December 26, 2019 and will be effective on April 24, 2020.
Loss Claim Process:
The previous Chapters 19 and 20 in HB-1-3555, have been combined into one newly revised Chapter 19, Loss Claims – Collecting on the Guarantee. The chapter revisions include:
• Elimination of the nine-month marketing period.
• Elimination of estimated net recovery calculation.
• Streamlined process for valuation of REO property.
• Use of Veterans Administration’s Net Value Factor for calculation of property preservation costs.
• Lenders will be required to submit a complete loss claim package within 60 days of the foreclosure, acquisition or possession date of the security property.
• Lenders will be required to submit loss claims electronically.
This new process will eliminate the need for REO disposition plans and implements a streamlined approach in processing timely loss claim payments to lenders. The change in the regulation is outlined in 7 CFR 3555.354 and 3555.356.
Loss Mitigation Process:
HB-1-3555, Chapter 18, Servicing Non-Performing Loans – Accounts with Repayment Problems, has been revised with the following:
• Greater emphasis on payment reduction as the primary driver of loss mitigation.
• Requirements on the Modified Interest Rate has been updated to match the waiver issued in April 2018.
• Mortgage Recovery Advance (MRA) option will be available as a stand-alone option.
Furthermore, 7 CFR 3555.51(b)(1) is revised to clarify that in addition to complying with Agency laws and guidance, lenders must comply with applicable federal, state and local laws including Consumer Financial Protection Bureau (CFPB), Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Acts (TILA).
Questions regarding this announcement may be directed to Richard Kane at Richard.Kane@usda.gov or by telephone at (202) 720-0320.
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