18.4 DOCUMENTATION REQUIREMENTS AND PENALTIES [7 CFR 3555.301] (07/02/18)

• Reason for the default;
• Date(s) and content of written notification(s) to the borrower;
• Dates and results of personal contacts with the borrower to resolve the debt both by telephone and/or in-person;
• Dates and documentation of property inspections; and
• 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 following penalties for a servicer's failure to take the required collection actions. These penalties are described in greater detail in Chapter 20 and Appendix 9 of this Handbook and include the grace period offered by the Agency as noted in Paragraph 18.4 B above.

• The claim will be denied if the servicer failed to attempt to make any contact with the borrower before the loan was 65 days past due;
• The claim will be denied if the servicer failed to notify the Agency, in accordance with Paragraph 17.3, when the account was in default;
• Accrued interest for the claim will be reduced by 50 percent 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 due;
• If the servicer failed to inspect the property before the loan became 65 days past due, the accrued interest will be reduced by 10 percent as long as no loss resulted for the servicer's failure to inspect the property timely; and
• 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. Should the appraisal fail to address the damage attributable to the servicer's failure to secure the abandoned property, the claim will be denied.