On August 23, 2018, the USDA Rural Housing Service published a Proposed Rule for the Single Family Housing Guaranteed Loan Program to the Federal Register. In a recent update, the agency has advised that this rule is in its final state and expects the rule to be published by the end of this month. The final rule has minimal variation from the proposed version. The changes will then become effective within 90-120 days of publication. The majority of the changes are related to the Loss Claims and Loss Mitigation sections of the regulation. Below is a summary of the changes which affect the Loss Claims process. These items are listed as shown in the proposed rule.
- Under the current regulation, the agency provides two opportunities for the lender to file a loss claim on REO property: When the property sells during the permissible marketing period, or after the permissible marketing period if the REO property does not sell.
- Under the proposed framework, lenders who acquire title must order a market value appraisal for the REO property within 15 days of acquiring title. The loss claim must be submitted within 45 days upon receipt of the appraisal.
- Because loss claims will be paid after acquisition and prior to marketing the property REO, this will eliminate the need for REO property disposition plans, different loss claim calculations based on whether the property has sold or remains in the lenders REO portfolio, and claim adjustments based on future recovery.
- The agency will employ a loss claim model that takes into consideration various factors including the market value appraisal as well as property preservation and disposition costs based on the VA Management and Acquisition factor costs.
These changes significantly impact the timing for filing the loss claim. CRFS will be partnering closely with our clients to adjust the referral and claim filing deadlines, including the date the market value appraisal is received. Once the final rule is published along with the Handbook updates (HB -1-3555), CRFS will review and provide additional information through a subsequent communication.