source:
  type: guide
  id: usda-hb-3555-18.2
  authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶18.2 —
    Overview
  description: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶18.2
    — Overview.
  coverage_tier: operative
obligations:
- id: usda-hb-3555-18.2-full
  canonical_id: usda-hb-3555-18.2-full
  section: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶18.2 — Overview
  type: do
  tags:
  - regulator-direct
  - usda
  - usda-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶18.2
      — Overview
    source_class: usda-handbook
    source_url: https://www.rd.usda.gov/sites/default/files/hb-1-3555_consolidated.pdf
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-05-25T14:10:13Z'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '18.2 OVERVIEW A goal of the Agency is to provide a borrower
      the maximum opportunity to remain a successful homeowner and the servicer should
      approach loan servicing as a preventive as well as a curative action. Prompt
      counseling and follow-up with a borrower who is late HB-1-3555 (03-09-16) SPECIAL
      PN 18-2 Revised (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. with a monthly
      payment, especially the first payment, is key to enhancing the likelihood of
      success. The servicer should identify any servicing actions that could aid a
      borrower who is experiencing repayment problems. 18.3 MINIMUM REQUIREMENTS [7
      CFR 3555.301] When a borrower’s account becomes past due, the servicer must,
      at a minimum, take the collection efforts described below. Each delinquency
      should be treated individually using collection techniques that fit the individual
      circumstances. Additionally, the Agency recommends making personal contact with
      a delinquent borrower until the delinquency is cured. Debt collection efforts
      and actions may be suspended when restricted by applicable laws. A. Initial
      Contact The servicer must attempt to make verbal or written contact with the
      borrower on or before the day an account becomes 20 days past due. The servicer
      must send a letter to the borrower if unable to reach the borrower by telephone.
      This contact must solicit enough information to evaluate the borrower’s ability
      to cure the default and to help determine the additional servicing actions to
      be taken. At a minimum, the servicer must attempt to establish and document
      the following: x The borrower’s current mailing address and telephone number.
      x The reason for the default. x Whether the reason is temporary or long-term.
      x The borrower’s attitude toward the debt. x The borrower’s present income and
      employment status. x The borrower’s current monthly obligations. x A realistic
      and satisfactory arrangement for curing the default. B. Notify Credit Repository
      The servicer must provide an accurate and complete file of the status of mortgages
      in its Agency-guaranteed loan portfolio to a minimum of three credit repositories
      each month with the goal of avoiding disputes that could arise from inaccurate
      or inconsistent reporting. HB-1-3555 (03-09-16) SPECIAL PN 18-3 Revised (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. C. Send Certified Letter to the Borrower
      Before an account becomes 60 days past due and if there is no payment arrangement
      in place, the lender must send a certified letter to the borrower requesting
      an interview for the purpose of resolving the past due account. The letter should
      emphasize the importance of meeting the debt obligation and explain the negative
      impact of non- repayment on the borrower’s credit history. The information required
      at the initial contact should be requested in the certified letter if initial
      contact was not made successful. D. Inspect the Property On or before the day
      an account becomes 60 days past due and before initiating a liquidation action,
      the servicer must assess the physical condition of the property, determine occupancy,
      and take the necessary steps to preserve and protect the property. At minimum
      the servicer must document the following.: x Physical Condition and Occupancy
      – Assess and document the physical condition of the property and determine the
      occupancy status of the dwelling. This will include identifying any actions
      essential to protect and preserve the property. x Abandoned property – The servicer
      will document the servicing file outlining the abandonment determination using
      indicators such as property and yard condition, posted “for sale” signs, presence
      of personal property or vehicles, last known mailing address, or absence of
      a power meter. The servicer will refer the loan for acceleration within 15 days
      of the date of the inspection report confirming the property was abandoned.
      Additional guidance regarding management methods and activities of custodial
      properties can be found in Section 18.7.A of this Chapter. x Inspections – The
      servicer should inspect the mortgaged property at least monthly to verify continued
      occupancy and ensure the property is being adequately maintained. Exterior inspections
      are sufficient to make these determinations. If the inspection shows the property
      is not being adequately maintained or is vacant or abandoned, an attempt to
      complete an interior inspection should be performed. Inspection records must
      be retained in the mortgage file and address at a minimum, the condition of
      the property, occupancy status, any necessary repairs to protect an abandoned
      property, the date of inspection, and who performed the inspection. HB-1-3555
      (03-09-16) SPECIAL PN 18-4 Revised (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.
      E. Proceed with Liquidation Once the account becomes 90 days past due and the
      borrower has been non- responsive or has declined all available foreclosure
      prevention options, the servicer must initiate liquidation proceedings considering
      any applicable notice and waiting period under state law. 18.4 DOCUMENTATION
      REQUIREMENTS AND PENALTIES [7 CFR 3555.301] A. Collection Records The servicer
      must maintain records of all collection efforts and must make them available
      upon request by the Agency. These records may either be in the form of servicing
      logs and/or copies of letters sent to the borrower. The records must indicate
      the following: x Reason for the default. x Date(s) and content of written notification(s)
      to the borrower. x Dates and results of personal contacts with the borrower
      to resolve the debt by telephone and/or in-person. x Dates and documentation
      of property inspections. x Date liquidation action was initiated. B. Grace Period
      for Completing Collection Action The servicer is required to take all collection
      actions within the time frames described in Paragraph 18.3 of this Chapter.
      However, the Agency may allow a grace period of five business days for completing
      each required collection action. Thus, no penalty will be assessed if the servicer
      takes the required action before the end of the grace period. C. Penalties for
      Failure to Fulfill Collection Obligations If the servicer fails to take the
      minimum collection efforts in Paragraph 18.3 and experiences a loss on the loan,
      the loss claim amount will be reduced. The Agency may apply the penalties below
      for a servicer’s failure to take the required collection actions. These penalties
      are described in greater detail in Chapter 19 and Appendix 8 of this Handbook
      and include the grace period offered by the Agency as noted in Paragraph 18.4B
      above. HB-1-3555 (03-09-16) SPECIAL PN 18-5 Revised (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. x The claim may be denied if the servicer failed to attempt to make any
      contact with the borrower before the loan was 65 days past due. x The claim
      may be denied if the servicer failed to notify the Agency, in accordance with
      Chapter 17 of this Handbook, when the account was in default. x Accrued interest
      for the claim will be reduced by 50% if the servicer failed to attempt to make
      a first contact with the borrower within 25 days past the due date, but within
      65 days past the due date. x If the servicer fails to order an inspection of
      the property within 65 days past the due date, the accrued interest will be
      reduced by ten percent. x The servicer is required to protect and preserve the
      property. The loss claim will be reduced by the dollar value of the loss attributable
      to the servicer’s failure to inspect and secure an abandoned property as documented
      by an appraisal. SECTION 2: LOSS MITIGATION [7 CFR 3555.301, 3555.303, 3555.304
      and 3555.305]'
  judgment: false
