20.3 FILING A LOSS CLAIM (06/22/16)

Owned by Kacey Olson
Nov 24, 2018
8 min read

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

The servicer can submit a claim in the result of a loss from a pre-approved preforeclosure sale (short sale), a third party purchase at a foreclosure sale, acquisition through voluntary liquidation, or as a result of a purchase by the servicer at a foreclosure sale. Servicers submit loss claim requests to the CSC located in St. Louis, Missouri. Guaranteed servicing contact information can be found at the following website: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do.

Requests for loss claim payments can be made by submitting a report with supportive documentation or through an electronic web submission electronically through GLS. The Agency relies on the accuracy of the information provided by the servicer on the claim. All information entered on the claim form must be supported by documentation in the claim file. It remains the servicer’s responsibility for the completeness and accuracy of the claim submission.

A detailed guide, “Loss Claim and Future Recovery Guide” is available to assist servicers to organize and prepare information provided to the Agency in support of loss claims, future recoveries, and additional recoveries beyond payment of the loss can be found at the following website under the Training and Resource Library link: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do. The guide provides the servicer with worksheets to use as a tool to process loss claims and future recovery discussed in Section 3.

A loss claim filed with CSC may require the servicer to prepare and submit Form RD 3555-20, “Rural Housing Report of Loss.”

A servicer approved to submit loss claim requests electronically will not be required to submit Form RD 3555-20. The Agency completes an approval process involving GLS security clearance, training, and monitoring of claim files during a conditional approval stage before a servicer receives written approval authority to fully utilize the automated claim process. A guide “Loss Claim Administration User Guide” can be found at the following website under the “Training and Resource Library” link: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do.

  1. Property That Is Sold For property that is sold before the end of the allowable marketing period, the loss claim must be submitted within 45 days after the date of REO sale including properties sold through voluntary liquidation (short sale), to a third party at the foreclosure sale, or sold from the servicer’s inventory within the allowable sale period. A guide “Loss Claim Administration User Guide” can be found at the following website under the “Training and Resource Library” link:https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do. The guide outlines the manual and automated process for submitting loss claims and an associated documentation checklist. Servicers may utilize an optional excel worksheet, included in a guide, which when utilized collectively assembles the dates of action and monetary information in the required loss claim package. The Agency mirrors HUD/FHA's maximum allowable costs for property preservation and maintenance costs. Information regarding their property and preservation cost reimbursements can be found at: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-18ml.pdf. Any subsequent release regarding this subject by HUD/FHA is also applicable.
  2. Unsold Real Estate Owned (REO) Property For REO properties that remain unsold at the expiration of the permissible sales/marketing period, the servicer will obtain a third party liquidation value appraisal and include the appraisal with the loss claim submission. The liquidation value will be utilized for loss claim calculation as it takes into consideration market pressures on a distressed property. The value established will be utilized to base a loss claim payment by including the VA cost factor of 15.95 percent. Liquidation appraisals should be ordered within 15 days of the end of the permissible marketing period. The lender must submit a loss claim request within 30 calendar days of receiving the results of the liquidation appraisal report A guide “Loss Claim Administration User Guide” can be found at the following website under the “Training and Resource Library” link: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do. The guide outlines the manual and automated process for submitting loss claims and an associated documentation checklist. Servicers may utilize an optional excel worksheet, included in a guide, which when utilized collectively assembles the dates of action and monetary information in the required loss claim package.
  3. Definition of Value Types in the Appraisal Process and General Procedures For a claim calculation on unsold REO, a third party liquidation valueappraisal obtained by the servicer will be the liquidation value as it takes into consideration market pressures on a distressed property. An authoritative source for the definition of liquidation value appraisal is the Appraisal Institute's 4th Edition of The Dictionary of Real Estate Appraisal, available online for purchase at the Appraisal Institute's website at: http://www.appraisalinstitute.org/ecm/publications.“Liquidation value: the most probable price that a specified interest in real property is likely to bring under all of the following conditions:
  • Consummation of a sale will occur within a severely limited future marketing period specified by the client.
  • The actual market conditions currently prevailing are those to which the appraised property interest is subject.
  • The buyer is acting prudently and knowledgeably.
  • The seller is under extreme compulsion to sell.
  • The buyer is typically motivated.
  • The buyer is acting in what he or she considers his or her best interest.
  • A limited marketing effort and time will be allowed for the completion of a sale.
  • Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto.
  • The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

This definition clearly differs from that of market value due to the motivation of the seller and the limited marketing period factors.

An appraisal report will be prepared by a Qualified State Licensed or Certified Appraiser and comply with the USPAP. The servicer will order the liquidation value appraisal. The first step in the appraisal process is to identify the intended user, intended use and the type of value for the appraisal. The following are items that should be identified in an appraisal order process when ordering a liquidation value appraisal:

  • When the appraisal assignment is to determine liquidation value, the Agency's Statement of Work (SOW) should clearly identify the value type to be reported. Incorporate the definition above into each State or Customer Service Center (CSC) SOW.
  • The severely abbreviated marketing period should be identified in the SOW. The client specified marketing period as identified by SFHGLP is 30 days and must be used by the appraiser whenever the typical marketing period exceeds 30 days. If the typical marketing period is identified by the appraiser as less than 30 days the appraiser should base their estimate of value on the shorter period and identify the time period used. The appraisal should be developed based on the actual physical condition of the property
  • The type of written appraisal report should be identified for the vendor. Appraisal reports should be the most recent revision of one of the following:
    • Uniform Residential Appraisal Report (Fannie Mae Form 1004 or Freddie Mac Form 70)
    • Manufactured Home Appraisal Report (Fannie Mae Form 1004C or Freddie Mac Form 70-B)
    • Individual Condominium Unit Appraisal Report (Fannie Mae Form 1073 or Freddie Mac Form 465)

The Agency allows modification of the above forms to capture the liquidation value. As part of the appraisal assignment, the appraiser will be requested to complete the following to support the value and condition of the property:

  • Market Conditions Addendum to Appraisal Report (Fannie Mae Form 1004MC or Freddie Mac Form 71). This form will further enhance and document a clear and accurate understanding of the market trends and conditions prevalent to neighborhoods. If information is unavailable document the Appraisal Report on the attempts when information is not available to support completion of this form.
  • Photographs documenting the interior inspection are part of the appraisal assignment. Interior photographs should include the living room, kitchen, bathroom, furnace, central air unit (if applicable), water heater, electrical panel and photographs of any damage or deferred maintenance.
  • The appraisal order should summarize the appraisal assignment information and confirm the appraisal fee, payment method, responsible party for payment, verify means of delivery and confirm any special instructions or assignment conditions, as discussed with the appraiser.
  • Prior to ordering a liquidation appraisal, the Agency approval official is responsible for determining the need for to request a liquidation value appraisal, in accordance with Paragraph 20.3 C noted above will request a certification of funds from the Fiscal Control Branch (FCB) in the National Finance and Accounting Operations Center (NFAOC) in St. Louis, Missouri. The request should be sent to dcfo-fcb2@stl.usda.gov. FCB will reply by email within 24 hours certifying funds are available for the proposed appraisal order. Include in the request the following information for fund certification.
  • Borrower's identification number obtained from GLS. Do not include or reference a social security number (SSN) or a borrower's name.
  • Lenders name.
  • Name of appraiser and company.
  • Amount of quoted appraisal fee.

This process ensures that funds are available to fund the request. Funding has been ample to cover all liquidation value appraisal requests. However, to ensure funds are available for your request, this step must be followed. Questions on this portion of the process may be directed to FCB at (314) 457-4143. States who order liquidation value appraisals on behalf of the Centralized Servicing Center (CSC) are responsible for fund certification.

  • A confirmation of the residential appraisal order obtained from the vendor, once an order is placed, is encouraged.

The appraisal should be ordered by Agency personnel. The Agency may utilize Attachment 20-A as an appraisal order form. The Department of Veterans Affairs' Appraisal Fee Schedule represents the customary and reasonable fee associated with the payment of a liquidation value appraisal. The fee schedule with timeline may be found at: http://benefits.va.gov/homeloans/appraiser_fee_schedule.asp.

Payment to the vendor will be completed through use of Form RD 3555-46, Report of Liquidation Expense Transaction 4040. The program loan cost expense account is not utilized for payment of SFHGLP liquidation value appraisals.

The form can be scanned and emailed with the Personally Identifiable Information (PII) required of the form, as long as the sender securely protects the document when sending though encryption. The sender may also fax or mail to the address/number provided below.

  • In Block 1 insert the 14 digit case number. This is the state, county and SSN of the borrower. This procedure differs from requesting fund certification. Personally Identifiable Information (PII) must be protected when working with sensitive information. The format is either ##-###-######### or #############.
  • Continue completion of blocks 2 through 7 as published in the Forms Manual Insert (FMI).
    • The actual cost of the appraisal is to be inserted into Block 8.
    • Complete the total amount of Block 8 in Block 9 of the form.
    • In Block 10, “Remarks,” insert the following: “Loss Claim Appraisal – Guaranteed Rural Housing Loan Program” followed by the borrower's identification number assigned in GLS. It is helpful to utilize the following format to identify the number in Block 10: Borrower ID: #########
  • By e-mail, scan the document to either a .PDF or .TIF document type. Forward the completed form and invoice requesting payment to:RD.DCFO.GLB@stl.usda.gov The form and invoice MUSTbe securely protected when utilizing the e-mail method.
  • Forward the completed form and invoice requesting payment to: USDA, Rural Development
    NFAOC – FC-350/GLB
    PO Box 200011
    Louis, MO 63120-0011
  • By priority mail, forward the completed form and invoice requesting payment to: USDA, Rural Development
    4300 Goodfellow Blvd.
    104 South End
    2ndFloor, Post H37
    St. Louis MO 63120
    General Branch Telephone #: 314.457.4192
  • By fax, forward the completed form and invoice requesting payment to: 314.457.4279

It is important that the appraisal be obtained and the loss claim payment request be completed in a timely manner to prevent unnecessary payment of additional interest. In addition, this loss settlement calculation can be completed immediately following the foreclosure sale or at any time during the nine-month marketing period. If the servicer then sells the property for an amount greater than the appraised amount used in calculating the loss, this recovery would be paid to the Government in accordance with this Chapter.

  1. Loss Administration – Record the Loss Claim in GLS Authorized Agency staff will capture information provided by a servicer submitting a manual claim outlined in Paragraph 20.3of this Chapter and populate GLS at the Add/Update Loss Claim page. Refer to the User Documentation Guide: Loss Claim Administrationfound at the following link under the Training and Resource Library link: https://usdalinc.sc.egov.usda.gov/USDALincTrainingResourceLib.do. Servicers who are approved to electronically submit a loss claim will populate the GLS page when submitting their claim.