The purpose of this Administrative Notice (AN) is to reissue guidance regarding the acceptable  foreclosure time frames by State for Single Family Housing Loans Guaranteed by the Single Family Housing Guaranteed Loan Program (SFHGLP). 

This AN replaces RD AN No. 4257 (1980-D) which expires on March 31, 2008. The acceptable foreclosure timeline for the state of Colorado has been extended from 130 days to 165 days.

This AN provides consistency in the treatment of loss claim interest reductions resulting from untimely foreclosure initiation or completion. RD Instruction 1980-D, section 1980.371(d) states that lenders must make a decision regarding liquidation by the time the loan is three payments past due. RD Instruction 1980-D, section 1980.374 states that the foreclosure must be initiated within 90 days of the date the decision to liquidate is made unless the foreclosure has been delayed by law or an alternative to foreclosure is recommended to resolve the delinquency.

Initiation of foreclosure begins with the first public action required by law, such as filing a Complaint or Petition, recording a Notice of Default, or publication of a Notice of Sale. RD Instruction 1980-D provides no guidance as to what is considered a reasonable time frame in which to complete a foreclosure in the state where the property is located. This AN establishes State specific guidance for time frames for completing foreclosure actions initiated after the date of this notice.

The SFHGLP adheres to Freddie Mac’s foreclosure time frames. These time frames are measured from the first legal action (which is in accordance with RD Instruction 1980-D) to the foreclosure sale date, which is when the six-month Real Estate Owned (REO) marketing period begins. Basic time frames of foreclosure processes most commonly utilized by private attorneys in state courts compare favorably to the Freddie Mac time frames. Additionally, Freddie Mac measures time frames in days as opposed to months, making compliance determinations and interest reduction calculations easier.

The SFHGLP will use the foreclosure time frames as prescribed in Attachment 1, when determining whether a lender has exercised diligence in completing the foreclosure process. Differences in state procedures will affect the length of time required to complete foreclosure, therefore, the time frame will depend on the location of the property. Attachment 1 also lists the recommended method of foreclosure and the first public action required by law to initiate each foreclosure method. In states where more than one foreclosure method is available but only one option is listed, the Agency chose the method that is most cost effective in reducing legal fees and accrued interest expense. The Agency does not intend to prohibit the payment of claims where the lender obtains title through a method of foreclosure other than what is recommended. However, the Agency office processing the loss claim request must determine whether the foreclosure method chosen by the lender was in the best interest of the Federal Government.

SFHGLP foreclosure time frames start with the date of the first legal action required by law, end with the foreclosure sale date, and do not include post-sale redemption periods or sale confirmations. Since redemption periods may be adjusted under some state laws based on the circumstances surrounding a property, such as the amount of unpaid principal still owed or the occupancy status of the property, reasonable time frames for redemption periods and sale confirmations should be established on a case-by case basis in accordance with State law.

Reimbursement of accrued interest may be reduced in accordance with RD Instruction 1980-D, section 1980.376(b) for each day that the foreclosure continues past the prescribed time frame unless the lender presents a valid reason that justifies the delay.

Lenders and the Agency must ensure that staff members are familiar with State guidelines related to foreclosures. Exceptions to the foreclosure time frame, which cause delays beyond the lender’s control must be documented and submitted with the claim package.Lenders are responsible for including documentation to support the first public action and the foreclosure sale date in the claim package provided to the Agency office responsible for processing the claim.

 The lender may be authorized a 60-day extension to the allowable time frame for compliance with State law when a bankruptcy delays the completion of foreclosure. To determine the impact of a bankruptcy filing on the foreclosure time frame, the total number of days from first action to foreclosure sale will be calculated. The total number of days between the bankruptcy filing date and the date of bankruptcy release or dismissal for each applicable bankruptcy case will then be subtracted from the total number of foreclosure days. The resulting number of days will be  compared to the SFHGLP foreclosure time frame plus an automatic 60-day extension to determine if time frame was met.

Each Rural Development State Office is responsible for notifying State-approved lenders of the revised foreclosure time frame requirements. The National Office will advise nationallyapproved lenders concurrent with the issuance of this AN.

In addition, during lender compliance reviews, files should continue to be reviewed in an effort to ensure that lenders are complying with the foreclosure requirements. Lenders that are determined to be out of compliance or that use Attorneys who are consistently out of compliance should be counseled on the provisions of the regulations and should be 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, USDA, Rural Housing Service, 1400 Independence Avenue, SW, Washington, DC 20250-0784. The telephone number is (202) 720-1452. Email is stuart.walden@wdc.usda.gov or debra.terrell@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