This AN replaces AN 4258 (1980-D) dated March 21, 2007. The Schedule of Standard Attorney/Trustee’s Fees for the Single Family Housing Guaranteed Loan Program has been updated in order to align with the Schedule of Standard Attorney’s Fees established by HUD.

It is not the Agency’s intent to regulate the amounts that lenders pay for services performed, but to limit the extent to which the SFHGLP reimburses the lender for attorney fees incurred. The SFHGLP will use Fannie Mae’s current Schedule of Standard Attorney/Trustee's Fees as the basis for determining reasonable and customary attorney fees. The Schedule of Standard Attorney/Trustee’s Fees became effective for all SFHGLP loans where the first legal action required initiating foreclosure; the petition for bankruptcy release, or the date the deed-in-lieu of foreclosure is executed is on or after February 1, 2003. Fees higher than the published amounts may be appropriate in cases such as contested foreclosures, required probate procedures, etc., and are subject to approval by the Agency approval official on a case-by-case basis. Justification for higher fees must be documented in the file.

It is important to make the distinction between attorney/trustee fees and attorney/trustee costs.
Typically, the fee for the service performed by the attorney is listed separately on the attorney’s invoice from the actual costs involved in the liquidation proceedings. A complete list of allowable liquidation costs would not be practical since procedural requirements vary by jurisdiction. Generally, the SFHGLP will reimburse a lender for costs which must be paid to public officials such as sheriffs, clerks of court or recorders of deeds, as well as costs, which are required by law (i.e., private service of process and required publications).

RD Instruction 1980-D, section 1980.374(c) states that in-house expenses of the lender will not
be allowed during the liquidation process. Employee salaries, staff attorneys and overhead charges are considered examples of in-house expenses. Overhead expenses include, but are not limited to, items such as telephone calls, photocopying charges, overnight mail fees and postage (not including certified or registered mailings required by law). Typical overhead costs are inherent to the foreclosure process and payment of these expenses is not reimbursable.

Outsourcing of services, such as document preparation services, are customary in the industry
and are also considered as attorney overhead. These fees are allowed as a separate expense only
if the attorney fee is reduced in a proportionate amount to the document preparation fee that is
charged.

If a foreclosure proceeding is interrupted due to a bankruptcy filed by the borrower, or if a deed in-
lieu of foreclosure or pre-foreclosure sale is accepted prior to the completion of the foreclosure, a maximum of 75% of the allowable attorney fee and all actual foreclosure costs incurred will be reimbursed. If state statute requires that the foreclosure be restarted from the beginning after a bankruptcy is dismissed or relief from stay is granted, the lender will be reimbursed for 100% of allowable foreclosure attorney fees and costs incurred after the bankruptcy stay is lifted. If state statute does not require that the foreclosure be restarted from the beginning, reimbursement of all foreclosure attorney fees incurred both before and after the bankruptcy is limited to the amount listed on the Schedule of Standard Attorney/Trustee’s Fees.

It is important to keep in mind that the maximum allowable bankruptcy fees cover the entry of an  appearance, request for service, preparation and filing of the proof of claim, objections to the proof of claim, detailed review and analysis of the plan, objection to confirmation of the plan, reaffirmation of the debt, attendance at any meeting of creditors (when attendance is appropriate), motions for relief and/or motions to dismiss, and any other customary services performed in a bankruptcy matter. In establishing the maximum allowable fees, it was presumed that attendance would be required for up to two court hearings and for all necessary meetings of creditors. The fee will vary depending on the chapter under which the bankruptcy is filed.

Although maximum allowable bankruptcy fees are established, reimbursement of attorney’s fees that have been prorated to reasonably relate to the amount of legal work actually performed by the bankruptcy attorney will be allowed. If the attorney has not completed the majority of legal services taken into consideration in the maximum allowable fee, the attorney’s fee should be prorated to reflect the amount of work actually performed by the attorney.

Generally, attorney fees will not be reimbursed that exceed the maximum allowable bankruptcy fees which cover the customary and routine legal services performed in each type of bankruptcy filing. However, when encountering situations whereby expenses for additional legal work beyond those pleadings and hearings that are considered in establishing the maximum allowable fee schedule, as long as the work is necessary to protect the interests of the Agency, additional reimbursement may be justified.

It is the responsibility of the lender to present sufficient documentation for justification of additional fees exceeding the maximum allowable bankruptcy fees noted in Attachment 1. Fees may be reimbursed for such fees and costs to the extent that services to protect the interests of the Agency were actually rendered and the fees and costs charged for them are reasonable and necessary and comply with the guidelines set forth. The Agency will not reimburse any attorney fees or costs incurred for a prior liquidation action that has been reinstated by the borrower or for which the foreclosed property is redeemed.

Attorney fees and costs should be included in the amount collected from the borrower with the
reinstatement or foreclosure redemption. The foreclosure fees in Attachment 1 list the attorney or trustee fee limits allowed for each SFHGLP recommended method of foreclosure listed in the current RD AN No.4342 (1980-D), “Single Family Housing Guaranteed Loan Program Acceptable Foreclosure Time Frames.” In states where more than one foreclosure method is available, the limits listed are based on the
method that is most cost effective in reducing legal fees and interest expense. The Agency does not intend to prohibit the payment of attorney fees and costs where the lender obtains title through a method of foreclosure other than what is recommended. However, the Agency approval official must determine whether the foreclosure method chosen by the lender was in the best interest of the government.

During lender compliance reviews, files should be reviewed in an effort to ensure that lenders are complying with the fee limit requirements. Lenders that are determined to be out of compliance
should be counseled on the provisions of the regulations and monitored closely for future
compliance.

Questions about this AN may be directed to Stuart Walden or Debbie Terrell of the Single Family Housing Guaranteed Loan Division, (202) 720-1452 or by email at stuart.walden@wdc.usda.gov or debra.terrell@wdc.usda.gov.

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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