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3.8 MONITORING A LENDER’S ORIGINATION AND SERVICING OF LOANS [7 CFR 3555.51]
Rural Development will conduct oversight reviews of the lender’s operations as provided in this section. Form RD 3555-16 outlines the responsibilities and terms to maintain approval for the SFHGLP. If Rural Development determines that the lender is not fulfilling the obligations of Form RD 3555-16, or that the lender fails to meet the required criteria, the lender will receive written notice of any deficiencies. If the lender is unwilling or unable to correct the deficiencies, Rural Development will proceed with termination as provided in Paragraph 3.9.
Form RD 3555-16 requires the lender to provide records pertaining to the SFHGLP for review by the Agency. The Agency will conduct an oversight review on a periodic basis as defined in Paragraph B of this section. Oversight reviews assist in Agency risk management and validate that lenders are complying with SFHGLP regulations. Oversight reviews include the examination of lender policies and procedures, cash management practices, and individual borrower case files (loan origination and servicing records, liquidation, and claim files).
A. Review Circumstances and Factors
x New Lender Oversight Review. Rural Development may review loans
originated by a newly eligible lender to ensure understanding of Agency regulations. Thereafter, the lender will be subject to a review provided in Paragraph 3.8B. x Other reviews. Rural Development may elect to conduct more frequent
oversight reviews when major trends or weaknesses, such as loan delinquencies, loan losses, failure to submit required data and reports, or other influencing factors related to assuring that the Government’s interest is adequately protected, have been noted, regardless of the volume of loans originated or serviced.
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B. Conducting Oversight Reviews
Oversight reviews will be performed on each lender as noted in this section. Oversight reviews may be conducted as an on-site review at the lender location or as a desk review at a site determined by the Agency. The review should be conducted by Agency staff or a designated representative that is knowledgeable of the lender functions to be reviewed. Rural Development will determine the amount of time that is needed to conduct the review. The review team members will utilize the Oversight Review Guide when planning, conducting, and reporting reviews. Three standards reviews may be performed:
x Loan origination review. A loan origination review is applicable to lenders
who perform all or a portion of the following functions: underwriting, processing, and closing. x Loan servicing review. A loan servicing review is applicable to a servicer
which is performing all or a portion of the following functions: reporting, loss mitigation, loss claims, and property disposition. x Expanded review. An expanded review is performed for lenders and servicers
that are both originating and servicing loans.
Oversight review findings will be communicated to the lender and/or servicer verbally and in writing. The reviewers will work with the lender and/or servicer to correct any findings identified. The clearance and follow-up process commences upon issuance of the findings report by the Agency or their representative. Upon closure of the review, or expiration of any follow-up period, a report will be prepared summarizing the review performed. A copy of all oversight review reports will be maintained in the Electronic Customer File (ECF) system.