The USDA Rural Development has released RD AN No 4321 titled, Single Family Housing Guaranteed Loan Program Loss Mitigation Comprehensive Policy Clarification. Rural Development (Agency) encourages approved Single Family Housing Guaranteed Loan Program (SFHGLP) lender/servicers to exercise loss mitigation techniques to the fullest extent possible when servicing defaulted loans under SFHGLP. This Administrative Notice (AN) clarifies the policies concerning loss mitigation actions.

The Loss Mitigation Guide (link below) describes loss mitigation alternatives, identifies circumstances for use, and discusses situations in which each alternative may be appropriate. Lender/servicers who service Section 502 Guaranteed Loans should use this Guide to give guidance to SFHGLP borrowers when considering loss mitigation alternatives. Agency staff that give guidance to lenders should refer to this Guide when considering the appropriateness of a lender's loss mitigation alternatives.

Comparison with prior AN
This updates AN 4165, which expired on April 30, 2007 and introduces the availability of a one-time loss mitigation incentive for either a pre-foreclosure sale or deed-in-lieu of foreclosure, lifting of the 12 month seasoning requirement for a loan modification, and clarification on lender/servicer monitoring of pre-foreclosure sale plans. For the population of borrowers where by it has been determined that retention of the home is no longer financially possible, loss mitigation in the form of a pre-foreclosure sale or deed-in-lieu of foreclosure should be pursued by the lender/servicer. Effective with the date of this AN all lender/servicers that assist a borrower by approving and closing either a pre-foreclosure sale or deed-in-lieu of foreclosure will receive a one time loss mitigation incentive. The following bullet points highlight amendments in this AN:

• All lender/servicers that have received prior approval from the Agency for either a pre-foreclosure sale or a deed-in-lieu of foreclosure on a SFHGLP loan will receive a one-time loss mitigation incentive at the time of loss claim filing. The incentive will be included in the loss claim reimbursement amount received by the lender/servicer. The following loss mitigation incentive amounts will be paid to lender/servicers on closed pre-foreclosure sales and deeds-in-lieu of foreclosure:
  Pre-foreclosure Incentive : $1,000.00
  Deed-In-Lieu of Foreclosure Incentive : $250.00
• The requirement that a loan must be seasoned 12 months prior to a loan modification being approved has been eliminated. Additional guidance can be found in Chapter 3, Section B, and Part 2 of the Guide.
• Properties that are listed for sale under an Agency approved 90 day preforeclosure sale plan, should be evaluated monthly by the lender and mortgagor in order to ensure that the property is being marketed to reflect current local economic conditions. Additional guidance can be found in Chapter 3, Section C, and Part 1 of the Guide.

Questions concerning this AN should be directed to Michelle Corridon, Stuart Walden or Susanne Wilson by calling (202) 720-1452 or by email at michelle.corridon@wdc.usda.gov, stuart.walden@wdc.usda.gov or susanne.wilson@wdc.usda.gov. 

To view the AN in its entirety, please click here

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH  and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 450 employees.  Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico