Background
As of December 31, 2006, the Rural Development staff located at the Centralized Servicing Center
(CSC) in St. Louis, Missouri, review all loss claims and supporting documentation, to determine
whether the lender/servicer has performed an expeditious liquidation and that claimed expenses are
reasonable and customary. Any reference to “Agency” can be interpreted to be the CSC and may
include other Agency staff that may be involved in the claim payment process.
The basic loss claim calculation is the total debt owed to the lender/servicer less the security
property sale proceeds. The total debt includes unpaid principal, authorized protective advances,
interest accrued through the settlement date, foreclosure expenses, and REO management and resale
expenses. In order to have a loss claim based on actual REO expenses and sale proceeds, REO must
be sold within six months of the acquisition date.
A loss claim on unsold REO is based on estimated net sale proceeds, using an estimated sale price
and estimated REO expenses. For a claim calculation on unsold REO, the estimated sale price is
based on a third-party liquidation value appraisal obtained by the Agency. A liquidation value is
used because it takes into consideration the market pressures on a distressed property. This value is
multiplied by a cost factor to estimate REO expenses. The cost factor, developed and updated
periodically by the Veterans Administration (VA), is based on an average of VA acquired property
operating expenses, selling expenses, and administrative expenses. The factor also takes into
consideration the cost of repairs to bring the property to minimum property standards. For example,
a loss claim based on an estimated sale price of $76,500, multiplied by the current factor of 11.87
percent, reimburses the lender $9,080.55 for estimated REO property management and disposition
expenses.
Future recovery is owed when the actual sales price of the REO sold exceeds the estimated sales
price in which the claim was based. Future recovery represents the difference between the estimate
and actual sale price and is shared proportionately, based upon the payment of the loss claim, with
the Agency and lender/servicer as outlined in RD Instruction 1980.377. Lender/servicers will
provide payment of future recovery within 30 days of notification of future recovery due. Future
recovery remains due for six years from notification of the demand from the Agency. Failure to
provide payment to the Agency could result in offset of future loss claim payments.
Additional recovery is owed when any of the following situations occur: collection of a deficiency
judgment; reimbursement of insurance premiums or property taxes; or hazard insurance claim
collections. Additional recovery may also be due under other situations as determined by the
Agency.

The following Exhibits are available in the AN are available to all lenders to assist in submitting loss claims, future/additional recovery:

• Single Family Housing Guaranteed Loan Program (SFHGLP)- Loss Claim, Future, and Additional Recovery User Guide, Version 4.1 (User Guide), provides detailed assistance in using the above Exhibits along with a glossary of terms.
• USDA Rural Development - Single Family Housing Guaranteed Loan Program (SFHGLP) Loss Claim Checklist, is provided to assist lenders in submitting all required information to prepare a loss claim.
• USDA Rural Development - Single Family Housing Guaranteed Loan Program (SFHGLP) - Automated Manual Loss Claim Input Worksheet, assists lenders to calculate the amount of loss claim to be paid. The entry of data into this sheet automatically completes RD Form 1980-20, “Rural Housing Guarantee Report of Loss”.
• Table to Determine the Number of Days between Any Two Given Dates, 365-day basis
• USDA Rural Development - Single Family Housing Guaranteed Loan Program (SFHGLP) - Future Recovery Calculator, is utilized by lenders to calculate the amount of Future Recovery due to the Agency.
• USDA Rural Development – Single Family Housing Guaranteed LoanProgram (SFHGLP) - Additional Recovery Calculator (Post Sale)

Also in included in the AN are sections discussing:

• Lender/Servicer Loss Claim Processing Responsibilities
• Lenders/Servicer Loss Claim Processing Categories
• Lenders/Servicers Designated for Manual Claim Processing
• Lenders/Servicers Designated for Automated Claim Processing
• Agency Staff Manual or Automated Loss Claim Responsibilities
• Agency Staff Manual or Automated Loss Claim Responsibilities for Loss Mitigation Incentive
• Lender/Servicer Future and/or Additional Recovery Processing Responsibilities
• Agency Staff Future and/or Additional Recovery Processing Responsibilities

Additional Recovery Calculator and User Guide will be distributed via e-mail to each State Office upon issuance of this AN and can also be obtained by contacting Michelle Corridon at michelle.corridon@wdc.usda.gov, Debbie Terrell at debra.terrell@wdc.usda.gov, or Susanne
Wilson at susanne.wilson@wdc.usda.gov.

Questions regarding this AN can be directed to Michelle Corridon at (804) 287-1595, Debbie Terrell
at (918) 534-3254, or Susanne Wilson at (202) 720-9705 in the Single Family Housing Guaranteed
Loan Division.

To view the AN in its entirety, please click here.

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