source:
  type: regulation
  id: usda-hb-3555-18.17
  authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
  description: "USDA HB-1-3555 §18.17 (Debt Settlement Reporting). Gap-fill (verbatim). \n"
obligations:
- id: usda-hb-3555-18.17-0
  canonical_id: usda-hb-3555-18.17-0
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: BT SETTLEMENT REPORTING Servicers will be responsible for reporting
    to IRS and all national credit reporting repositories any discharge of indebtedness or any debt settled through
    liquidation in accordance with Internal Revenue Code.'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: BT SETTLEMENT REPORTING Servicers will be responsible for reporting to IRS and all national
      credit reporting repositories any discharge of indebtedness or any debt settled through liquidation in accordance
      with Internal Revenue Code.
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-1
  canonical_id: usda-hb-3555-18.17-1
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: "04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized\
      \ by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not\
      \ available through their guidance portal, except to establish historical facts. ATTACHMENT 18-A THE LOSS\
      \ MITIGATION GUIDE \x17 \b\x03\x0F\x12\x16\x16\x03\x10 \x17 \x04\x17 \x12\x11\x03 \x18 \a\b\x03 \x16\x8B\x90\
      \x89\x8E\x87\x03 \x83\x8F\x8B\x8E\x9B\x03 \x91\x97\x95\x8B\x90\x89\x03 \x97\x83\x94\x83\x90\x96\x87\x87\x86\
      \x03\x0F\x91\x83\x90\x03 \x13\x94\x91\x89\x94\x83\x8F\x03 Effective:"
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-2
  canonical_id: usda-hb-3555-18.17-2
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: 04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. THE LOSS MITIGATION GUIDE SINGLE FAMILY
      HOUSING GUARANTEED LOAN PROGRAM 1. SERVICING EARLY DELINQUENCY LOANS (LESS THAN 90 DAYS PAST DUE) The purpose
      of all collection efforts is to bring a delinquent mortgage current in the shortest time possible. Single
      Family Housing Guaranteed Loan Program (SFHGLP) policy as stated in 7 CFR § 3555 describes minimum servicing
      requirements to accomplish this objective. The majority of one or two payment delinquencies will be addressed
      by either voluntary reinstatement by borrowers, or through traditional collection methods outlined in 7 CFR
      § 3555. While a loss mitigation program is designed to address serious defaults, any reasonable servicer efforts
      to cure loans that are past due for 30 days or more contribute to the goal of helping residents in rural areas
      retain homeownership and reduce the Agency’s losses. Thus, effective loss mitigation begins in the early stages
      of servicing defaulted loans. It is the servicer’s responsibility to validate and document the borrower’s
      capacity under the terms of the loss mitigation workout recommendation. A. EARLY INTERVENTION To facilitate
      a successful loss mitigation intervention, the servicer must attempt to make verbal or written contact with
      the borrower or an authorized representative if the payment is not received by the 20th day after it is due.
      Before an account becomes 60 days past due and if there is no contact or payment arrangement in place, the
      servicer must send a certified letter to the borrower requesting an interview in an effort to resolve the
      past due account. The earlier the servicer contacts the delinquent borrower and identifies the cause of the
      default, the more likely it is that the default will be cured, and the borrower will be able to keep the home.
      It is critical that the servicer make all decisions in a manner consistent with fair housing and lending principles.
      Servicers are strongly encouraged to recommend borrowers contact state and/or local agencies for financial
      assistance. B. CAUSE OF DEFAULT The servicer should identify the underlying cause of the delinquency at the
      earliest stage of borrower contact and determine if the problem is permanent or temporary. A borrower whose
      ability to support the mortgage debt has been permanently reduced
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-3
  canonical_id: usda-hb-3555-18.17-3
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. through death, divorce, or permanent
      disability is unlikely to cure the default through a repayment plan. Such a borrower should be evaluated for
      either a loan modification, which may result in a reduction of the mortgage payment, or a pre-foreclosure
      sale, which allows a transition to more affordable housing. A borrower who needs credit, legal, or employment
      assistance to resolve temporary financial problems should be referred to housing counseling, such as HUD housing
      counseling at 1-800-569-4287 or HUD’s approved housing counseling website, https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
      as soon as possible. C. DEFAULT COUNSELING A borrower who receives early counseling is much more likely to
      bring the loan current. Servicers are strongly encouraged to recommend financial counseling to borrowers and
      establish working relationships with counseling agencies. The servicer should provide HUD’s publication 2008-5-FHA,
      Save your Home: Tips to Avoid Foreclosure, rev April 2012 to the borrower, before the account becomes 60 days
      past due. This may not be feasible, however, if the borrower has filed a bankruptcy petition and, in the opinion
      of the servicer’s legal counsel, providing a copy of the pamphlet would be a violation of the bankruptcy stay.
      In such cases, the servicer should keep documentation of this fact in the servicing file. D. INFORMAL REPAYMENT
      PLANS An informal repayment plan is a verbal agreement lasting for 3 months or less. Such a plan is the first
      and best means to ensure that a one- or two-month delinquency does not escalate beyond the borrower’s ability
      to cure. In such a plan, the servicer should carefully review the borrower’s financial situation and arrange
      payment terms that the borrower can realistically keep, and the delinquency can be cured. Informal repayment
      plans should be documented and retained in the servicing permanent file. If it becomes apparent that an informal
      repayment plan will not be sufficient to resolve the delinquency, the servicer should refer to section 3,
      “General” of this guide, to evaluate whether one of the more formal loss mitigation strategies should occur.
      E. SALE OF THE PROPERTY A borrower who does not have the ability to cure the delinquent loan, but who has
      sufficient equity in the property to satisfy the outstanding debt from a sale proceeds, should be assisted
      in selling the property. This assistance may include a written agreement that provides a short-term reduction
      or suspension of payments pending the'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-4
  canonical_id: usda-hb-3555-18.17-4
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. sale of the property. The servicer has
      full responsibility in assisting the borrower in such a case. 2. LOSS MITIGATION OVERVIEW SFHGLP servicers
      have the authority and the responsibility to use effective actions and strategies to assist borrowers to retain
      their homes, and thus reduce losses to the Agency and the servicer. Because of its ongoing relationship with
      the borrower, the servicer is in the best position to determine which, if any, loss mitigation strategies
      are appropriate in each circumstance. A. SERVICERS LOSS MITIGATION ACTIONS The servicer must: x Report a complete
      and accurate loan-servicing plan to the agency that clearly outlines the approved action via USDA Lender Interactive
      Network Connection (USDA LINC). x Consider all reasonable means to address the delinquency at the earliest
      possible time. x Use payment or credit scoring tools, if available, to identify high risk borrowers that may
      need more attention, rather than wait until standard contact dates. x Inform the borrower(s) of available
      loss mitigation options and the availability of housing counseling before the end of the second month (60th
      day) of delinquency. (Ensuring that the borrower receives the HUD publication https://www.hud.gov/sites/dfiles/Housing/documents/RevUpdHmownSuc121518f
      nl.pdf titled Homeowners Guide to Success, is acceptable, as well as documentation in the servicing and collection
      notes of conversations with the borrower concerning mitigation options). x Evaluate each delinquent loan once
      they become greater than 30 days past due but no later than the 90th day of delinquency to determine which
      loss mitigation option is appropriate. x Use loss mitigation whenever feasible to avoid foreclosure. x Reevaluate
      each delinquent loan monthly until delinquency is cured or the foreclosure action is complete. x Report loss
      mitigation actions through monthly default status reporting using ESR status of mortgage code values. x Initiate
      foreclosure within six months (180 days) of default unless a loss'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-5
  canonical_id: usda-hb-3555-18.17-5
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. mitigation option is being pursued and
      ensure that all actions taken are documented. x Initiate foreclosure timely on vacant and abandoned properties.
      x Retain a complete audit trail showing all loss mitigation actions. 3. GENERAL This section describes the
      general policies, recommended procedures, and minimum actions that constitute effective loss mitigation techniques.
      A. DEFAULT STATUS OF THE LOAN Loss mitigation options are intended to provide relief for a borrower who is
      delinquent or facing imminent default. A default is defined as any loan that has failed to perform under any
      covenant of the mortgage or deed of trust for 30 days or more A borrower is ‘‘facing imminent default’’ if
      that borrower is current or less than 30 days past due on the mortgage obligation and is experiencing a significant
      reduction in income or some other hardship that will prevent the borrower from making the next required payment
      on the mortgage during the month in which it is due. Any attempt to deliberately manufacture or misrepresent
      pertinent facts about a borrower’s financial or other qualifying status may disqualify the borrower from participating
      in loss mitigation options and result in civil or criminal penalties. If perpetrated by a servicer, such actions
      may lead to administrative and/or judicial penalties against the servicer. B. OWNER OCCUPANCY The borrower
      must occupy the property as their principal residence to be eligible for loss mitigation retention options.
      However, loss mitigation disposition options may be considered if the property has been recently vacated due
      to one of the following, but not limited to, special circumstances: x Employment transfer x Natural disaster
      x Medical condition A servicer may make an exception for a non-occupant borrower who is seeking relief through
      a pre-foreclosure sale (PFS) or DIL when the reason for vacancy was involuntary'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-6
  canonical_id: usda-hb-3555-18.17-6
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. in nature. The servicer maintains the
      documents justifying such an exception in the servicing file. C. OTHER ELIGIBILITY FACTORS The following eligibility
      restrictions apply in all cases: x A borrower who has a pending/active bankruptcy may be considered for loss
      mitigation options; however, the servicer must fully document the borrowers pending plan with items such as,
      but not limited to, a copy of the proposed/confirmed trustee plan. The servicer must obtain trustee approval
      prior to loss mitigation plan execution. x If a servicing agreement, investor guidelines, or applicable law
      restricts or prohibits compliance with any steps outlined in this guide, the servicer must maintain evidence
      in the loan file documenting the nature of any deviation from the provided guidance. D. 90 DAY REVIEW The
      servicer evaluates each delinquent SFHGLP loan that it services when monthly installments are due and unpaid
      for 91 days, and considers all loss mitigation techniques to determine which, if any, are appropriate. To
      meet this evaluation requirement, the servicer’s early involvement in the delinquency is demonstrated by contact
      with the borrower to gather sufficient information about the borrower’s circumstances, intentions, and financial
      condition. While the servicer cannot be responsible if a borrower fails to respond to repeated contacts, the
      servicer must clearly document aggressive efforts to reach the borrower within 90 days of the default. E.
      CURABLE DEFAULT When the hardship no longer exists and the borrower is committed to remaining in the home,
      the servicer should consider reinstatement options in this order: x Special forbearance x Loan modification'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-7
  canonical_id: usda-hb-3555-18.17-7
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. F. NON-CURABLE DEFAULT When the hardships
      continue to exist, the delinquency is not curable, and the borrower is not committed to remaining in the home,
      the servicer should consider disposition options in this order: x Pre-foreclosure sale (PFS) x Deed-in-lieu
      of foreclosure (DIL) G. OPTION PRIORITY The following waterfall of loss mitigation workout options must be
      adhered to: 1. Informal Repayment Plan 2. Special Forbearance 3. Loan Modification 4. Pre-Foreclosure Sale
      5. Deed-In-Lieu Whenever possible, the servicer should review the borrower for all loss mitigation options
      concurrently and if eligible, provide a decision based on the highest available option in the waterfall. In
      all cases, if a borrower is eligible for both a retention and a pre-foreclosure option, the retention option
      must be prioritized. If the borrower accepts and then fails a retention option within the first 12 months,
      they can be offered a pre- foreclosure option based on this evaluation with no further need to document ability/
      inability to pay. In some cases, the waterfall of loss mitigation options may warrant utilizing a disposition
      workout in-lieu of a retention workout based on the borrower’s involuntary inability to pay. H. MONTHLY EVALUATION
      Each month the account remains delinquent, the servicer must reevaluate the status of each loan following
      the 90-day review and maintains documentation of the evaluations in its servicing or collection system. The
      evaluation may be as simple as notes in the collection system that the borrower’s payments under special forbearance
      are made as'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-8
  canonical_id: usda-hb-3555-18.17-8
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. agreed. Reports generated by servicing
      systems that track repayment plans are adequate for documentation purposes. I. EVALUATING THE BORROWERS FINANCIAL
      CONDITION For any loss mitigation option, the servicer must obtain detailed financial information from the
      borrower. The servicer may ask the borrower to give this information on a form of its choice that collects
      all the data elements required for loss mitigation. If the borrower is cooperative, the information may be
      taken during a telephone interview if it is a complete picture of the borrower’s financial information. Regardless
      of how the financial information is initially obtained, the servicer should request the borrower provide evidence
      to support the income with current paystubs and/or a profit and loss statement if the borrower is self-employed.
      The servicer should obtain a credit report to verify debts, and any other forms of verification the servicer
      deems appropriate. Once a servicer has the borrower’s complete financial information, they should analyze
      the borrower’s current and future ability to meet the monthly mortgage obligation by determining the borrower’s
      repayment ability as follows: x Determine the borrower’s current monthly gross income making necessary adjustments
      for income fluctuations. x Calculate the borrower’s normal monthly financial obligations including debt service
      on the mortgage and other credit obligations. Adjust for obligations due over the term of the proposed special
      forbearance agreement, or in the case of all other options, for a minimum of three months. x Any child support
      or alimony obligations should be documented with a court order to determine the monthly obligation. x Determine
      the borrowers current Housing to Income (HTI) ratio as well as their total debt (TD) ratio. All detailed financial
      information used to determine the borrower’s financial capacity must be dated within 90 days from the date
      of receipt by the servicer. The servicer must communicate a decision to the borrower within 30 days of receiving
      a complete loss mitigation package. The servicer must use good business judgment to ensure that the workout
      option selected reasonably reflects the borrower’s ability to pay. A borrower with sufficient income should
      be asked to cure the debt through a retention option.'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
- id: usda-hb-3555-18.17-9
  canonical_id: usda-hb-3555-18.17-9
  section: USDA HB-1-3555 18.17 — Debt Settlement Reporting
  description: '18.17 Debt Settlement Reporting: 04-14-25) PN 637 Guidance documents lack the force and effect of
    law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely
    on any guidance that is not available through their guidance portal, except to establish historical facts.…'
  type: do
  tags:
  - regulator-direct
  - gap-fill
  - usda-hb-3555
  - section-complete
  primary_source:
    tier: 1
    authority: USDA Technical Handbook HB-1-3555 §18.17 — Debt Settlement Reporting
    source_class: usda-handbook-hb-1-3555
    source_url: https://www.rd.usda.gov/resources/directives/handbooks
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-06-18T00:00:00+00:00'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '04-14-25) PN 637 Guidance documents lack the force and effect of law, unless expressly authorized
      by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available
      through their guidance portal, except to establish historical facts. J. INCOME VERIFICATION Servicers shall
      document their process in determining each borrower’s income scenario. When verifying income of a borrower,
      servicers should use good business judgment consistent with how they evaluate borrowers when modifying loans
      held in their own portfolio but at a minimum collect the following: x Wage or Salary income: o Paystub(s)
      not more than 90 days old at time of submission to servicer, that covers at least 4 weeks of earned income.
      o Borrowers most recent W-2 or executed tax returns (can be waived if paystubs document at least 6 months
      YTD income). x Self-Employment Income: o Most recent quarterly or YTD profit and loss statement along with
      a copy of the most recent executed tax return. Audited financial statements are not required. x Other/ Benefit
      Income: o Bonus, commission, tips, overtime, etc. income must be documented with reliable third-party evidence
      that such income is consistent and likely to continue. o Benefit income including but not limited to social
      security, disability, public assistance, and Supplemental Nutrition Assistance Program (SNAP) benefits can
      be considered income for the purpose of loss mitigation. Benefit income must be documented through award letter,
      exhibits, or benefits statements from the provider or evidence of receipt to the borrower. x Non- Taxable
      Income: o The servicer, at its discretion, may “gross up” income not subject to federal taxes. When grossing
      up any income, the servicer must document and support the amount of grossed up income and should use the same
      effective tax rate, not to exceed 25%, for grossing up that the borrower used to calculate the borrower’s
      federal income tax return from the previous year. o Excluding documentation from prior years, all financial
      information must be dated within 90 days from the date of receipt by the servicer.'
    drafter_attestation: Verbatim from HB-1-3555 §18.17 body (max-gap occurrence), snapshot 0466acd1ea2d17a4; substring-verified.
  judgment: false
