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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.
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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]