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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.
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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.
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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.