USDA HB-1-3555, Chapter 18 (Servicing Non-Performing), § 18.10 — The Foreclosure Process

USDA HB-1-3555, Chapter 18 (Servicing Non-Performing), § 18.10 — The Foreclosure Process

Effective 2025-04-14 · USDA chapter revision · Procedure Notice 637

• Total Debt – Includes unpaid principal, any advances due from the borrower including any unrecorded mortgage recovery advance, interest accrual through the liquidation process, and other potential costs such as liquidation and real estate owned (REO) expenses. • Security Value – will be based on the current market value of the property in “as is” condition with a 90-120-day marketing time frame. If security property is inaccessible, the valuation will be based on exterior inspection only. If a significant (20% or more) decline from the value established at loan origination and the pre-foreclosure valuation is evident, the servicer is encouraged to review the value determination in accordance with established quality controls and be prepared to support the decline in value. • Recovery Potential – consider the borrower’s other assets, ability to pay the deficiency, and other sources of recovery such as insurance claims or pending litigation. • Foreclosure Bid – the servicer should consider state statutory requirements and the relationship of the outstanding debt and potential REO costs to the market value of the property. When the total debt, including the cost of acquiring, managing, and disposing of REO property, is greater than the gross proceeds expected from a foreclosure sale at the market value of the security property and potential recovery from other sources, third-party bidding is encouraged by entering a foreclosure sale bid less than the value of the property. Servicer should use the USDA Individual State Based Bidding Chart, with the goal of avoiding REO and its associated management and disposition costs. This chart can be located on the USDA Training and Resource Library in the Loan Servicing section under Loss Mitigation found at https://www.rd.usda.gov/resources/usdalinc-training-resource-library/loan-servicing. The Agency does not need to concur on foreclosure bids. • Auction Services – servicers are encouraged to use non-affiliated auction companies during the foreclosure process including marketing the property and bidding services. The Agency will reimburse servicers for auction service fees in an amount not exceeding five percent of the property net sales price when the property is sold to a third party. Properties must be marketed for a minimum of 15 days prior to the scheduled sale date and sold for an amount equal to or greater than the “Net Value Bid.” C. Reinstatement of Account Unless required otherwise by state statute, the servicer may reinstate an accelerated account if the borrower meets all the following conditions: • Pays the total amount delinquent, including protective advances, accrued interest, any foreclosure related costs, and other expenses incurred by the servicer in a lump sum. • Has the documented ability to resume scheduled payments on the loan.

Source: USDA HB-1-3555, Chapter 18 (Servicing Non-Performing), § 18.10 — The Foreclosure Process · source URL · snapshot 40fcd1ad9e90721f