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Mortgage Servicing and Loan Modifications: 7 C.F.R. § 3550.211 Liquidation

(a) Policy. When RHS determines that a borrower is unable or unwilling to meet loan obligations, RHS may accelerate the loan and, if necessary, acquire the security property. The borrower is responsible for all expenses associated with liquidation and acquisition. If the account is satisfied in full, the borrower will be released from liability. If the account is not satisfied in full, RHS may pursue any deficiency unless the borrower received a moratorium at any time during the life of the loan and faithfully tried to repay the loan.

Mortgage Servicing and Loan Modifications: 7 C.F.R. § 3555.4 Mediation and appeals

Whenever Rural Development makes a decision that will adversely affect a participant, the participant may proceed with alternative dispute resolution including mediation and a USDA National Appeals Division hearing in accordance with 7 CFR parts 1 and 11. The participant also may request an informal review of the adverse decision made by Rural Development. Except when the adverse decision applies to a loss claim, the applicant or borrower and the lender may participate in the appeal process.

Mortgage Servicing and Loan Modifications: 7 C.F.R. § 3555.302 Protective advances

Lenders may pay the following pre-liquidation expenses necessary to protect the security property and charge the cost against the borrower’s account.

(a) Advances for taxes and insurance. Without prior Agency concurrence, lenders may advance funds to pay past due real estate taxes, hazard and flood insurance premiums, and other related costs.

Mortgage Servicing and Loan Modifications: 7 C.F.R. § 3555.304 Special servicing options

(a) General.

(1) Lenders must exhaust traditional servicing options outlined in this part or have determined that use of traditional servicing options would not resolve the delinquency, prior to special servicing options. Lenders must exhaust special servicing options prior to liquidation in accordance with §§ 3555.305 or 3555.306.

(2) Use of special loan servicing does not change the terms of the loan note guarantee.

Mortgage Servicing and Loan Modifications: 7 C.F.R. § 3555.305 Voluntary liquidation

The lender must have exhausted the servicing options outlined in §§ 3555.302 through 3555.304 to cure the delinquency before considering voluntary liquidation. The methods of voluntary liquidation of the security property outlined in this section may be used to protect the interests of the Government.

(a) Eligibility. To be eligible for voluntary liquidation, the following conditions must be met:

Mortgage Servicing and Loan Modifications: 7 C.F.R. § 3555.306 Liquidation

(a) General.

(1) When a lender determines that a borrower is unable or unwilling to meet loan obligations with servicing options under this subpart, the lender must accelerate the guaranteed loan and, if necessary, foreclose.

(2) Prior to acceleration the lender must have advised the borrower, in writing, of available foreclosure avoidance options and the borrower must have failed to request such options.

Mortgage Servicing and Loan Modifications: C.1 Introduction

This appendix collects guidance, consent orders, program guidelines, or statements of policy issued by federal agencies regarding efforts the financial industry has taken to help borrowers in default or at risk of default on their mortgage.

Mortgage Servicing and Loan Modifications: C.2 Federal Financial Agencies’ Statement on Loss Mitigation

The federal financial regulatory agencies and the Conference of State Bank Supervisors (CSBS) issued a Statement on Loss Mitigation Strategies for Servicers of Residential Mortgages on September 4, 2007, encouraging servicers of securitized residential mortgages to use their authority under pooling and servicing agreements to identify borrowers at risk of default and pursue appropriate loss mitigation strategies designed to preserve homeownership.

Mortgage Servicing and Loan Modifications: C.3 FDIC Loan Modification Program

The FDIC developed its loan modification program in November 2008 in an attempt to streamline and standardize the mortgage industry’s approach to modifying mortgages. The model is based on the loan modification program the agency developed when it took over Indy Mac Federal Bank. To assist lenders and servicers in adopting the program, the FDIC published a guide describing the program, and a set of standard documents and marketing materials, including a sample loan modification agreement.

Mortgage Servicing and Loan Modifications: C.4 Making Home Affordable Modification Program

The U.S. Treasury developed the Home Affordable Modification Program (HAMP) as part of the Making Home Affordable (MHA) program in February 2009 to help homeowners in default or at risk of defaulting on their mortgage with loan modifications.1 The HAMP program ended on December 31, 2016. However, applications submitted on or before December 30, 2016 continued to be processed after that date.

Mortgage Servicing and Loan Modifications: C.5 Interagency Review of Foreclosure Policies

The Federal Reserve System, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision (OTS) conducted on-site reviews of foreclosure processing by fourteen federally regulated mortgage servicers in 2010.2 The agencies subsequently announced enforcement actions against the servicers and third-party vendors for unsafe and unsound practices related to residential mortgage servicing and foreclosure processing.

Mortgage Servicing and Loan Modifications: C.6 National Mortgage Settlement

The attorneys general of forty-nine states and the District of Columbia, the federal government, and five of the largest mortgage servicers (Bank of America, JPMorgan Chase, Wells Fargo, Citi, and Ally/GMAC) reached an agreement on February 9, 2012, to settle claims regarding abuses in the servicing of loans in foreclosure.3 The settlement included monetary sanctions, mortgage servicing reforms, assistance to existing and former homeowners, creation of programs to refinance homeowners in loans that are underwater, and money to the states to fun

Mortgage Servicing and Loan Modifications: C.7 Government-Sponsored Entities (GSEs) Servicing Guidelines

Fannie Mae and Freddie Mac are the common names for two government-sponsored entities (GSEs) more formally known as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, respectively. The GSEs purchase mortgages from lenders and either hold them in investment portfolios or resell them as mortgage-backed securities to investors. The two corporations were taken over by the federal government in September 2008 and are overseen by the Federal Housing Finance Agency (FHFA).