source:
  type: guide
  id: usda-hb-3555-17.1
  authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶17.1 —
    Introduction
  description: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶17.1
    — Introduction.
  coverage_tier: operative
obligations:
- id: usda-hb-3555-17.1-full
  canonical_id: usda-hb-3555-17.1-full
  section: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶17.1 — Introduction
  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 ¶17.1
      — Introduction
    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: '17.1 INTRODUCTION Servicers are responsible for servicing SFHGLP
      loans and protecting security interests and servicing accounts in a reasonable
      and prudent manner. This Chapter provides additional guidance about the ways
      in which servicers are expected to service loans that are either current or
      less than 20 days past due. Servicing non-performing loans is described in Chapter
      18 of this Handbook. Section 1 defines the requirements associated with servicing
      current accounts, such as collecting payments, escrowing funds, and loan reporting
      functions. Section 2 defines how the servicer should consider borrower requests
      for partial releases of security, and transfers and assumptions. A. Sale of
      Loans to Approved Lenders [7 CFR 3555.54] Lenders may sell SFHGLP loans to any
      USDA approved servicing lender (servicer). While the guarantee is transferred
      with the loan, the originating lender will be held to the responsibilities in
      accordance with Section 4.9, Indemnification, of Chapter 4 regarding omissions
      and/or unresolved review findings stemming from problems at loan origination
      when a loss claim is requested. Requirements for loan sales are described in
      Chapter 4 of this Handbook. B. Contracting for Servicing of SFHGLP Loans The
      holding lender is responsible for ensuring the loan is properly serviced by
      a USDA approved servicing lender. If the USDA approved servicing lender contracts
      out rights to a third-party provider, the holding lender remains responsible
      for ensuring the loan is properly serviced. C. Notifying the Agency of Loan
      Sales or Servicing Transfers The Agency must be notified within 15 days of a
      sale or servicing transfer by submitting Form RD 3555-11 to the Single Family
      Housing Servicing Branch, Lender Reporting Section. Agency notification should
      be password protected or encrypted and emailed to rd.so.hsb@usda.gov. D. Non-Compliance
      Failure by the lender to comply with Agency requirements including reporting
      or other program guidelines, or failure to provide high quality origination,
      underwriting, or servicing can result in the following Agency actions: HB-1-3555
      (03-09-16) SPECIAL PN 17-2 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.
      x Withdraw the lender’s approval; x Transfer its portfolio of SFHGLP loans;
      x Require the lender to indemnify the Agency if a loss is paid; deny or reduce
      future loss claims; and/or x Withdraw the loan guarantee. The Agency will notify
      the lender in writing of non-compliance and provide appeal rights, if necessary,
      in accordance with HB-1-3555, Appendix 3. Failure to comply with the reporting
      requirements and other lender responsibilities outlined in HB-1-3555, Chapter
      4 could indicate non-compliance. SECTION 1: SERVICING PERFORMING LOANS 17.2
      REQUIRED SERVICING ACTIONS [7 CFR 3555.252] In addition to collecting regularly
      scheduled payments, servicers are also responsible for a wide variety of servicing
      activities including, but not limited to, the following actions. A. Ensuring
      Payment of Loan Servicers should have a system of record to record loans, monitor
      payment activity, and the history of borrower accounts. The USDA approved servicer
      is responsible for monitoring activities completed by any third-party providers.
      B. Handling Late Payments and Fees Servicers may assess late payment charges
      to a borrower’s account when appropriate; however, these charges will not be
      covered by the loan guarantee. The late payment charge must not exceed a rate
      that is reasonable and customary, as governed by state law, the percentage of
      the payment due as prescribed by HUD, or the percentage of payment as prescribed
      by Fannie Mae or Freddie Mac. C. Ensuring Payment of Taxes and Insurance Servicers
      must have adequate internal control processes to ensure that real estate taxes,
      assessments, and flood and hazard insurance premiums are paid as required for
      all property securing a guaranteed loan. Escrow funds may be used only for the
      purpose for which they were collected. Escrow accounts for all guaranteed loans
      must be administered in accordance with all applicable regulations and must
      be insured by the FDIC or the NCUA insurance fund. Rural Development will not
      include any taxes or insurance amounts that accrued prior to due date of last
      paid installment in any potential loss claim. HB-1-3555 (03-09-16) SPECIAL PN
      17-3 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. D. Maintaining
      Hazard and Flood Insurance Until the loan is paid in full, servicers must ensure
      that borrowers continuously maintain hazard and, if applicable, flood insurance
      in an amount sufficient to protect the property securing the guaranteed loan.
      Servicers should adopt accepted industry standards for hazard and flood insurance
      as noted in Chapter 16 of this Handbook. x Servicers must administer hazard
      insurance claims involving property damage in an expeditious manner. All payments
      for insured losses must be applied to the restoration of the security or to
      the loan balance. x Insurance claims for structural damage may be paid directly
      to the homeowner to advance funds to contractors, provided all the following
      conditions are met: o The mortgage is current; o The borrower’s payment history
      does not show delinquencies of two payments or more; o The property is occupied
      by the borrower; o The released funds may not exceed $20,000.00; and x The borrower
      must execute an affidavit in which the borrower expressly agrees to apply the
      released funds promptly to repair or reconstruct the residence. x For insurance
      claims that do not meet the criteria required above, servicers must supervise
      the insurance funds if a loss to the insured property occurs. All repairs and
      replacements using the insurance proceeds must be planned, performed, and inspected
      in accordance with Agency construction requirements and procedures x Chapter
      12 of this Handbook describes policies for obtaining plans, specifications,
      and completing construction inspections involving repairs. See Chapter 18 of
      this Handbook for additional information regarding insurance claims involving
      property damage. x In the case where the borrower cannot demonstrate adequate
      hazard insurance, the servicer can place a policy with coverage in accordance
      with Chapter 16 of this Handbook. E. Obtaining Final Payments The servicer must
      not satisfy a borrower’s account and release the security instruments until
      full payment of all amounts owed including unpaid principal and HB-1-3555 (03-09-16)
      SPECIAL PN 17-4 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. interest,
      protective advances, overpayment of interest assistance, shared equity, and
      mortgage recovery advances have been received and verified. For those borrowers
      who have received interest assistance and/or a mortgage recovery advance (MRA)
      (whether secured or unsecured), even if the borrower repays the full outstanding
      account balance, the account is not considered paid in full until shared equity
      and the MRA have been paid. F. Handling Borrowers in Bankruptcy The servicer
      is responsible to take appropriate action during bankruptcy proceedings to protect
      the borrower and the government’s interest. Upon receipt of a bankruptcy notice,
      the servicer must: x Obtain a copy of the bankruptcy petition; x Complete and
      file a proof of claim within the time set by the bankruptcy court; x Maintain
      copies of all documents associated with the bankruptcy; x Review the proposed
      repayment plan; x Comply with all applicable laws and regulations; x Monitor
      the bankruptcy proceedings; x Monitor receipt of post- and pre-petition payments;
      and x Determine that tax and insurance payments are current or determine if
      additional funds are necessary to maintain an escrow account. The servicer must
      refer the account to an attorney when the account becomes 30 days or more delinquent.
      Refer to Chapter 18 for more detailed information on delinquent accounts in
      bankruptcy. G. Complying with the Servicemembers Civil Relief Act (SCRA) The
      Servicemembers Civil Relief Act requires that the interest rate charged a borrower
      who enters full-time active military duty after a loan is closed not exceed
      six percent if the borrower’s military obligations are affecting their ability
      to pay. The borrower should supply the servicer with documentation of their
      active-duty status. Active military duty does not include participation in a
      military reserve or the National Guard unless the borrower is called to active
      duty. HB-1-3555 (03-09-16) SPECIAL PN 17-5 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. 1. Change of Active Military Status The servicer will cancel the six
      percent interest rate and resume the promissory note interest rate when notified
      by the borrower that he or she is no longer on active military duty. The servicer
      may process a new payment assistance agreement if the borrower is eligible according
      to Appendix 6 of this Handbook. 2. Amount of Assistance According to Appendix
      6 of this Handbook, after reduction of the interest rate to six percent, the
      amount of payment assistance received during the period of active military duty
      will be the difference between the amount due at the subsidized rate for principal
      and interest and the amount due at the six percent interest rate. The six percent
      interest rate will be effective with the first payment due after the servicer
      confirms active military status of the borrower. The Agency will not include
      interest on a loss claim filed in excess of six percent for the period the veteran
      was eligible, nor for any period of time the servicer failed to establish the
      note rate after notification by the borrower of non-active military service.
      H. Approving Borrower Actions During the term of the guaranteed loan, the borrower
      may ask the servicer for permission to undertake actions that could affect the
      value of the security property. Section 2 of this Chapter provides guidance
      to servicers regarding such actions as a partial release of security or a transfer
      and assumption of an outstanding guaranteed loan. 17.3 REPORTING REQUIREMENTS
      [7 CFR 3555.51 (B)(8) Servicers are required to report monthly loan status (203)
      and monthly loan default status (264) reports for all SFHGLP loans in their
      portfolio via Electronic Status Reporting (ESR) by the sixth government workday
      of each month. Servicers are also required to review and correct status and
      default reject errors starting on the 13th business day of the month through
      the last day of the calendar month. New servicers, as part of the lender approval
      process as outlined in Chapter 3 of this Handbook, will enter into an agreement
      to electronically report the status of their SFHGLP portfolio. Servicers’ documentation,
      including detailed guides for reporting can be found at: https://www.rd.usda.gov/resources/usda-linc-training-resource-library/loan-
      servicing The servicer must continue to report on each loan until: HB-1-3555
      (03-09-16) SPECIAL PN 17-6 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 default is cured (default reporting can stop after the appropriate code
      to end the default event has been reported via ESR); x The mortgage is paid-in-full,
      and the loan has been reported as Paid in Full via ESR; or x The account is
      liquidated through foreclosure sale, pre-foreclosure sale, or a deed- in-lieu
      of foreclosure until the servicer is in receipt of the loss claim payment. If
      a lender is unable to sell a loan or retains the loan they must contact the
      Single Family Housing Servicing Branch, Lender Reporting Section at rd.so.hsb@usda.gov
      to initiate the process for monthly status reporting and annual fee payment.
      Failure to submit timely loan status reporting or annual fees is a violation
      of a lender’s participation agreement and could result in reduced or denied
      loss claim payments (HB-1-3555, Appendix 8). 17.4 PROTECTIVE ADVANCES [7 CFR
      3555.302] Servicers may advance funds to pay for emergency expenses necessary
      to protect the security property and charge the cost against the borrower’s
      account. If the borrower is unable to repay the advance in a lump sum with the
      next scheduled payment, the servicer may schedule repayment consistent with
      the borrower’s ability to pay if the borrower can make regular payments and
      bring the mortgage account current within 18 months or less. In most cases,
      the servicer should be able to arrange with the borrower to bring the account
      current within 120 days. A. Advances for Property Repairs Servicers must ensure
      that borrowers immediately notify them of any loss or damage to insured property
      and collect the amount of the loss from the insurance company. Because protective
      advances are covered by the guarantee, servicers should advance funds only to
      pay for emergency repairs to protect the security value of the property. Protective
      advances for repairs should be considered only if the borrower informs the servicer
      that an additional loan or reimbursement from an insurer cannot be obtained
      in an appropriate timeframe, or if the borrower has abandoned the property.
      Protective advances that are not reimbursed through insurance coverage may be
      covered by the guarantee with proper documentation as to why the advance was
      not covered by insurance if the advance was other than for taxes and insurance
      premiums. Either the borrower or the servicer may identify the need for repairs
      of the security property. All repairs, replacements, and new construction must
      be planned, performed, and inspected in accordance with the standards specified
      in Chapter 12 of this Handbook. If the servicer is unsure whether the repairs
      would affect the security value of the HB-1-3555 (03-09-16) SPECIAL PN 17-7
      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. property, the servicer
      should request that an inspector examine the property to assess whether repairs
      are necessary. Based on the value of the property, the servicer must determine
      whether the repairs are cost effective and document this assessment in the servicer’s
      file. Protective advances exceeding $2,000 require Agency concurrence. B. Advances
      for Taxes and Insurance The servicer is responsible for maintaining escrow funds
      in a reasonable and prudent manner assuring real estate taxes, insurance, and
      assessments are paid timely even if a shortage exists requiring the servicer
      to advance funds on behalf of the borrower. The servicer will notify the borrower
      in writing of any escrow shortages and document the decision in the servicer’s
      file. Servicers are encouraged to adopt accepted industry standards for hazard
      and flood insurance as noted in Chapter 16 of this Handbook. Servicers may also
      advance for unpaid association dues to protect the status of the lien when necessary.
      17.5 INSURANCE PROCEEDS [7 CFR 3555.252] When insurance funds remain after payments
      for all repairs, replacements, and other authorized disbursements have been
      made and the repairs have been inspected in accordance with Agency construction
      requirements noted in Chapter 12 of this Handbook, the funds must be applied
      in the following order: 1. Prior liens (including past-due property taxes);
      2. Past-due amounts (requires written consent from borrower); 3. Protective
      advances; and 4. Released to the borrower if the servicer’s debt is adequately
      secured. SECTION 2: BORROWER ACTIONS REQUIRING SERVICER OR AGENCY APPROVAL 17.6
      OVERVIEW [7 CFR 3555.255] A borrower must obtain approval from the servicer
      before taking actions that may affect the security value of a property. In certain
      circumstances, the servicer does not need to obtain Agency approval before consenting
      to a transaction involving a partial release of the security; however, servicers
      must obtain approval from the Agency before consenting to a transfer with an
      assumption of the outstanding debt. Specific guidelines for each type of action
      are provided below. HB-1-3555 (03-09-16) SPECIAL PN 17-8 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. 17.7 PARTIAL RELEASE OF SECURITY [7 CFR
      3555.255 (B)] If a servicer consents to a transaction affecting a security property,
      such as selling or exchanging security property, or granting a right-of-way
      across the security property, the servicer must ensure that certain conditions
      are met and that the mortgage file is carefully documented. A. Conditions for
      Partial Release 1. Adequate Compensation The borrower must receive adequate
      compensation. x The sale of any part of the security property must result in
      a payment equal to the value of the security being released or rights granted;
      or x The exchange of security property must result in another parcel of property
      acquired that has value equal to or greater than that being released; or x The
      granting of an easement or right-of-way must result in benefits that are equal
      to or greater than the value of the security property being released. 2. Net
      Proceeds In an effort to maintain the current loan to value ratio for the guaranteed
      loan, all proceeds must be applied in the following order: 1. Pay customary
      and reasonable costs related to the transaction owed by the borrower. 2. To
      a prior lien debt, if any. 3. To be used for improvements to the security property.
      If the funds are to be used for property improvements, the servicer should release
      the funds as the improvements are completed. The servicer must ensure that the
      proceeds are used as planned. 4. To be used to repay any delinquency or missed
      payments. 5. To the outstanding balance to maintain at minimum the current loan
      to value. 6. If any net proceeds remain and the borrower’s post transaction
      loan to value is no greater than 80%, funds may be released to the borrower.
      HB-1-3555 (03-09-16) SPECIAL PN 17-9 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. 3. Program Standards After the transaction is completed, the security
      property must meet program standards. 4. Ability to Repay the Loan The borrower’s
      ability to repay the guaranteed debt must not be jeopardized. B. Processing
      a Partial Release Request - Agency To get Agency approval, the request must
      be sent to the SFHGLP National Headquarters Servicing Branch at sfhglpservicing@usda.gov.
      The servicer must send evidence of all completed actions to the Agency for review.
      At minimum the servicer should provide the Agency with the following: x The
      borrower’s reason for requesting the servicer to make the release, including
      information regarding the contemplated use of land to be released. x The monetary
      consideration, if any, to be received by the borrower. x Determination of the
      value of the property if a release is processed, taking into consideration any
      improvements being completed. An appraisal of the security property must be
      conducted if the most current appraisal is more than 1 year old or if it does
      not reflect current market value. The appraisals must reflect the value of the
      property prior to the release of partial security and the value of the remaining
      property once the release of partial security occurs. x Plans and specifications,
      including cost estimates, of any alterations proposed for the remaining property
      after release. The approval official will analyze the servicer’s request for
      partial release and consider the following: x Estimate of value prior to the
      proposed release. x Estimate of value after the proposed release. x Loss in
      value attributed to the proposed release. x What use or purpose the released
      property will serve once released. x The estimated cost of proposed improvements
      to the remaining property. HB-1-3555 (03-09-16) SPECIAL PN 17-10 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 estimated value of the remaining
      property after any proposed improvements are completed. x Consideration if the
      remaining mortgage security is less marketable as a result of the release. x
      Borrower’s ability to repay, including their current delinquency, if any, and
      the number of missed payments. Notification of approval/denial will be communicated
      to the servicer. Any denial must state the reason(s) for denial in detail. C.
      Servicer Delegated Approval If all the following additional conditions are met,
      servicers are delegated to review and provide a decision to the borrower’s request
      with no review by USDA required for the voluntary or involuntary release of
      the security: x The portion of the property being conveyed does not exceed 10%
      of the area of the mortgaged property; x There is no damage to existing structures
      or other improvements; x There is no unrepaired damage to sewer, water, or paving;
      x Total compensation received for the taking of the property is applied to reduce
      the unpaid principal balance of the mortgage; and x The conveyance occurs after
      the mortgage loan was guaranteed. D. Processing a Partial Release - Servicer
      To process a partial release under the delegation authority described above,
      the servicer must complete and/or document the following actions. If the servicer
      eventually files a loss claim, the claim must be accompanied by the servicer’s
      certification that all requirements have been met: x The borrower’s reason for
      requesting the servicer to make the release, including information regarding
      the contemplated use of land to be released; x The monetary consideration, if
      any, to be received by the borrower; HB-1-3555 (03-09-16) SPECIAL PN 17-11 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 Confirm the mortgage loan is
      in good standing, the amount of principal balance owed and the due date of last
      paid installment; x Determine the value of the property if a release is processed,
      taking into consideration any improvements being completed. An appraisal of
      the security property will be conducted if the most current appraisal is more
      than 1 year old or if it does not reflect current market value. The appraisals
      must reflect the value of the property prior to the release of partial security
      and the value of the remaining property once the release of partial security
      occurs; x Complete any forms required by state law; x A list of unpaid special
      assessments, if any, and the total amount payable; x Update the legal descriptions
      of the property, as necessary; x Report any restrictions to be imposed on the
      land to be released; x Provide a survey or sketch of the property showing dimensions
      of the portion to be released, the location of the existing and proposed improvements,
      and the relation of the property to surrounding properties; x Plans and specifications,
      including cost estimates, of any alterations proposed for the remaining property
      after release; x For an exchange of a portion of the security property, obtain
      title clearance for the new security before the release of the existing security.
      Security instruments must be obtained for the new property; x For a sale of
      a portion of the security property, deliver the release when full payment is
      received; and x Notify the Agency of any reduction in the outstanding principal
      balance through monthly status reporting. 17.8 TRANSFER AND ASSUMPTION [7 CFR
      3555.256] Transfers between family members do not require Agency concurrence
      since the transferee is not required to assume the debt. HB-1-3555 (03-09-16)
      SPECIAL PN 17-12 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. A. Transfer
      without Assumption If the borrower transfers the security property and the transferee
      does not assume the debt, the servicer does not need to seek Agency approval
      but must simply notify the Servicing Office at rd.so.hsb@usda.gov to withdraw
      the loan guarantee. B. Transfer Under Garn-St. Germain In the following limited
      cases, which generally involve transfers of title between family members, the
      Agency will continue to honor the guarantee regardless of whether the transferee
      assumes the outstanding debt. The due-on-sale clause will not be triggered in
      the following cases as defined by the Garn-St. Germain Depository Institutions
      Act of 1982: x A transfer from the borrower to a spouse or children not resulting
      from the death of the borrower; x A transfer to a relative, joint tenant, or
      tenant by the entirety resulting from the death of the borrower; x A transfer
      to a spouse or an ex-spouse resulting from a divorce decree, legal separation
      agreement, or property settlement agreement; x A transfer to a person other
      than a deceased borrower’s spouse who wishes to assume the loan for the benefit
      of persons who were dependent on the deceased borrower at the time of death,
      if the dwelling will be occupied by one or more persons who were dependent on
      the borrower at the time of death, and there is a reasonable prospect of repayment;
      or x A transfer into an inter vivos trust in which the borrower does not transfer
      rights of occupancy in the property. When a transferee obtains a property with
      a guaranteed loan through a transfer of title as noted above, the following
      actions will occur: x The servicer will notify the Rural Development Guaranteed
      Loans Servicing Office at rd.so.hsb@usda.gov of the transfer. x Rural Development
      will continue with the guarantee, whether or not the transferee assumes the
      guaranteed loan. 1. Requirements for an Assumption Under Garn-St. Germain HB-1-3555
      (03-09-16) SPECIAL PN 17-13 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.
      The Agency may approve a transfer with an assumption of the outstanding debt
      if the following conditions are met: x Transferor must remain liable for the
      debt; and acknowledge continued liability for the debt in writing. x The transferee
      must assume the entire outstanding debt and acquire all the property securing
      the guaranteed loan balance. x The priority of the existing lien securing the
      guaranteed loan must be maintained or improved. x The use of GUS is unavailable
      for transfer and assumptions and must be manually submitted and underwritten;
      however, the documents can be submitted through GUS. A job aid for this type
      of submission is available in the https://www.rd.usda.gov/resources/usda-linc-training-resource-
      library in the “Loan Origination” tab. When a transferee assumes a property
      with a guaranteed loan through a transfer of title as noted above, the following
      options are available: x The transferee may assume the guaranteed loan on the
      rates and terms contained in the promissory note. x The transferee may assume
      the guaranteed loan under new rates and terms if the transferee applies and
      is eligible. Any new rates and terms must not exceed the current market interest
      rate and term, and the interest rate must not exceed the interest rate on the
      initial loan as described in HB-1-3555, Chapter 7. x If the account is past
      due at the time an assumption agreement is executed, the transferee may be reviewed
      for loss mitigation and, if eligible, the loan may be modified to bring the
      account current as described in HB-1-3555, Chapter 18, Attachment A, The Loss
      Mitigation Guide. x Any subsequent transfer of title, except upon the death
      of the inheritor or between inheritors to consolidate title, will trigger the
      due-on-sale clause. 2. Closing a Transfer with an Assumption of the Outstanding
      Debt The Agency will review the application as it does any other request for
      a loan guarantee and will issue a conditional commitment if it approves the
      transfer. Once the servicer obtains Agency approval, the servicer may proceed
      with closing HB-1-3555 (03-09-16) SPECIAL PN 17-14 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. the transaction. Along with all other required
      loan closing documents, the servicer must provide the Agency with a copy of
      the executed assumption agreement. The servicer must process the assumption
      on a form approved by Fannie Mae, Freddie Mac, HUD, or VA and signed by all
      parties. The existing Form RD 35517, Loan Note Guarantee, will remain in effect.
      The servicer should note the date, amount assumed, and name(s) of the assuming
      party on the original Form RD 3555-17 and provide with all other required loan
      closing documents. The lender will follow the same procedures as provided in
      Chapter 16 of this Handbook. C. Unauthorized Sale or Transfer If a servicer
      becomes aware that a borrower has transferred title to a property without the
      servicer’s knowledge and the transfer does not fall under the Garn-St. Germain
      rule, the servicer must take one of the following actions: x Liquidate the guaranteed
      loan and submit a claim for any loss; or x Notify the Agency of the transfer
      and continue with the loan without the guarantee. D. Modification to Promissory
      Note and Security Instruments If the repayment schedule or interest rate changes
      as a result of the transfer and assumption, the transferor will remain liable
      for the debt and, therefore, must approve any changes. The rates and terms must
      not exceed the rates and terms allowed for new guaranteed loans and must not
      exceed the current market interest rate. The following will apply: x The debt
      must not exceed the remaining amount due on the original loan; and x The term
      of the loan must not exceed thirty years from the date of the transfer and assumption.
      The servicer must request and obtain prior approval for the transfer and submit
      an explanation of the reasons for the proposed change in rates and terms. Refer
      to HB-1- 3555, Chapter 18 for additional guidance regarding servicing of non-performing
      loans. 17.9 MINERAL LEASES [7 CFR 3555.255 (a)] Servicers must obtain approval
      from the Agency before consenting to the lease of mineral rights. HB-1-3555
      (03-09-16) SPECIAL PN 17-15 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.
      A servicer may consent to the lease of mineral rights and subordinate its lien
      to the lessee’s rights and interests in the mineral activity provided the subordination
      of the guaranteed loan to a mineral lease does not entitle the leaseholder to
      any proceeds from the sale of the security property and the following are met:
      x The security property will remain suitable as a residence; x The lender’s
      security interest will not be adversely affected; and x Rural Development’s
      environmental requirements are met. If the proposed activity is likely to decrease
      the value of the security property, the servicer may consent to the lease under
      the following conditions: x The borrower must assign 100 percent of the income
      from the lease to the servicer; x Proceeds will be utilized as a principal reduction
      to the loan; and x The total rent to be paid is at least equal to the estimated
      decrease in the market value of the security property. If the proposed activity
      is not likely to decrease the value of the security property, the servicer may
      consent to the lease if: x The borrower agrees to use any compensation received
      from the lessee to repair any damage to the site or dwelling; or x Assign the
      proceeds to the servicer to reduce the principal balance. The servicer remains
      responsible for documenting their approval and oversight of the above activity
      and borrower request. 17.10 UNAUTHORIZED ASSISTANCE [7 CFR 3555.257] Refer to
      HB-1-3555, Chapter 1 for information regarding unauthorized assistance HB-1-3555
      (03-09-16) SPECIAL PN 18-1 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.
      CHAPTER 18: SERVICING NON-PERFORMING LOANS-ACCOUNTS WITH REPAYMENT PROBLEMS
      [7 CFR 3555.301]'
  judgment: false
