RDKYAN021.doc

SHAPE \* MERGEFORMAT

United States Department of Agriculture

Rural Development

Kentucky State Office

RD KY AN No. 021(1955-A & 3550)

DATE: May 11, 2009 SUBJECT: Conducting Foreclosure Sales

TO: Area Directors

Single Family Housing Program Director

Multi-Family Housing Program Director

Business-Cooperative Service Program Director

Community Program Director

PURPOSE/INTENDED OUTCOME:

The purpose of this Administrative Notice (AN) is to implement a procedure authorizing Area Director to conduct foreclosure sales, and to collect and transmit sale proceeds to the U.S. Marshal’s Service.

COMPARISON WITH PREVIOUS AN:

This replaces RD AN No. 004 (1955-A & 3550) dated January 31, 2008. The order for the foreclosure process has changed. The following items; 3, 4, 5, and 6 pertain to Single Family Housing sales only. Changes are as follows:

(1) Implementation Responsibilities now requires two (2) Rural Development employees to be present at the sale. One employee will be designated the Primary RDO-FCS and one employee will be designated the Alternate RDO-FCS. See page 3.

(2) Section I, “Ethical Standards For Conducting Foreclosure Sales”, has been added. See pages 3 & 4.

EXPIRATION DATE: May 31, 2010 Filing Instructions:

HB 1 3550, Chapter 13

RD Inst. 1955-A

RD KY AN No. 021 (1955-A & 3550)

771 Corporate Drive • Suite 200 • Lexington, KY 40503

Phone: (859) 224-7322 • Fax: (859) 224-7450• TDD: (859) 224-7422 • Web: http://www.rurdev.usda.gov/ky

Committed to the future of rural communities.

“USDA is an equal opportunity provider, employer and lender.”

To file a complaint of discrimination write USDA, Director, Office of Civil Rights, 1400 Independence Avenue, SW, Washington, DC 20250-9410 or call (800) 795-3272 (voice) or (202) 720-6382 (TDD).

RD AN No. 021 (1955-A & 3550)

(3) Exhibit A setting the sale date and Exhibit H requesting bidding instructions must be sent to the State Office within three (3) business days of receipt of appraisal. The sale date must be set for nine (9) weeks after receipt of appraisal, to allow CSC sufficient time to advertise and allow time for the current BPA Holder to provide the “Affidavit of Publication” prior to the sale date.. See Section V, page 8

(4) A Net Recovery Value Worksheet (NRV) must be completed for each sale. See Section VI, page 8.

(5) A. The Area Office will be responsible for submitting the foreclosure AD to the Centralized Servicing Center (CSC). The Centralized Servicing Center (CSC) will be responsible for submitting AD to current BPA Holder.

B. The final ad must be ran two (2) weeks prior to sale date.

C. A copy of Exhibit E, “Affidavit of Publication”, must be obtained prior to the sale date.

See Section VII, pages 9 & 10.

The delivery ticket log is no longer required.

(6) The Centralized Servicing Center (CSC) will be responsible for uploading information regarding the foreclosure sale to the nationwide web site and sending flyers to the investors in Kentucky. See Section VIII, pages 9 & 10.

(7) The remaining balance is owed within sixty (60) days in the Eastern District of Kentucky (EDK) and ninety (90) days in the Western District of Kentucky (WDK). A certified check is the only acceptable form of payment. See Section X, page 12.

(8) Exhibit A was revised to require a primary RDO-FCS and an alternate RDO-FCS be designated.

(9) Exhibit C was revised to require the primary RDO-FCS and alternate RDO-FCS to initial, date, and certify the Exhibit.

(10) Exhibit D has been revised to require the name and address of the Area Director be inserted in the ad. An open house is now required and the date must be inserted in the ad.

(11) Exhibit F was revised to add a line for email address and fax number of the designated primary and alternate RDO-FCS. Added note that “Affidavit of Publication” must be mailed to the Kentucky Rural Development Area Office address listed in the advertisement and a copy faxed prior to the sale date.

(12) Exhibit H requires a Net Recovery Value Worksheet (NRV) be completed to support Rural Development’s bid.

(13) Exhibit I requires the primary RDO-FCS and the alternate RDO-FCS to initial and certify the Exhibit.

(14) Exhibit O requires the primary RDO-FCS and the alternate RDO-FCS to sign, date, and certify the Exhibit.

IMPLEMENTATION RESPONSIBILITIES:

Area Directors are authorized to conduct foreclosure sales, and collect and transmit sale proceeds to the United States Marshal’s Service. The Area Director must designate two (2) Rural Development employees with loan approval authority to conduct the foreclosure sale. One Employee will be designated as the Primary Rural Development Official to conduct the Foreclosure Sale and will be notated as the Primary RDO-FCS. The Second Employee will be designated as the Alternate Rural Development Official to conduct the Foreclosure Sale and will be notated as the Alternate RDO-FCS.

Upon receipt of the Judgment and Order of Sale and a letter of instructions from the State Director, the Area Director will designate one employee as the Primary RDO-FCS and the second employee as the Alternate RDO-FCS using Exhibit A.

The designated Primary RDO-FCS will be responsible for ensuring compliance with the foreclosure sale duties and responsibilities as required in Section I; Section II; Section III; Section IV; Section V; Section VI; Section VII; Section VIII; and Section IX except for item 2 in this AN. The Primary RDO-FCS will initial, date and certify Exhibit C and Exhibit I and certify Exhibit O.

The designated Alternate RDO-FCS will attend the foreclosure sale and be at the site 30 minutes before the sale starts. He/she will be responsible for Exhibit O, “Sign-In Sheet for Foreclosure Sale Attendees” and obtain the names, addresses of persons who attend the sale. He/she will assist the Primary RDO-FCS in taking bids at the sale. He/she will initial, date and certify Exhibit C and Exhibit I and certify Exhibit O. If the Primary RDO-FCS must recuse himself/herself, the Alternate RDO/FCO must be prepared to assume the duties and responsibilities of the Primary RDO-FCO. In this event, the Primary RDO-FCO will assume the duties of the Alternate RDO-FCO.

I

ETHICAL STANDARDS FOR CONDUCTING FORECLOSURE SALES____

Title 5 of the Code of Federal Regulations (C.F.R.) §§2635.502 and 702 address how Federal employees are to avoid the appearance of impartiality in performing official duties and the restrictions on the use of his/her public office (i.e. USDA employee status) for his/her own private gain or the private gain of friends, relatives, or persons whom the employee is affiliated in a nongovernmental capacity, including non-profit organizations of which the employee is an officer or member, and persons with whom the employee has or seeks employment or business relations.

The Primary RDO-FCO and the Alternate RDO-FCO must be cognizant of any appearance/impartiality issues involving personal relationships and official responsibilities as they relate to the sale of properties at public foreclosure. In the event that the Primary RDO-FCO is assigned to sell a property at foreclosure, before the sale starts he/she must review the registration of bidders for the sale. If he/she recognizes a relative or friend on the registration list with whom he/she has a close personal relationship, he/she must recuse himself/herself from the sale and allow the Alternate RDO-FCO to proceed with the sale. Transferring the auction responsibilities to the Alternate RDO-FCO will eliminate any impartiality issues. Questions about the above requirements may be directed to the State Ethics contact.

The Primary RDO-FSO is also required to have a borrower case file with him/her at the foreclosure sale. The information in the case file will ensure that the appropriate internal processes were followed prior to the sale.

The case file must contain the following information:

1. A copy of Exhibit E, “Affidavit of Publication”, will be obtained prior to the foreclosure sale. This will assure the required advertisement has been run according to the court order. NOTE: If the advertisement was not run correctly, the foreclosure sale will be cancelled. A copy of the executed Affidavit of Publication will be filed in position one of the borrower case file.

2. Exhibit O – “Sign-In Sheet for Foreclosure Sale Attendees” will be signed and certified to the correctness of the document. The original Exhibit O will be filed in position one of the borrower case file.

3. A printed copy of the USDA Web site page for the foreclosure sale will be filed in position one of the borrower case file.

4. Exhibit(s) C and I must be initialed where indicated by both employees designated to hold the sale and filed in position one of borrower case file.

II. EVICTION AND REMOVAL OF PERSONAL PROPERTY

Upon receipt of a Judgment and Order of Sale, the Primary RDO-FCS must visit the property and POST THE JUDGMENT AND ORDER OF SALE ON THE PREMISES. If the Primary RDO-FCS is not comfortable with posting the Judgment and Order of Sale, he/she should contact the State Office for assistance.

If the property is still occupied, the Primary RDO-FCS will attempt, if he/she feels comfortable in doing so, to discuss with the occupants when they plan to vacate the premises and remove their belongings. According to the Judgment and Order of Sale, the borrower has 30 days from the executed order to vacate. If possible, this should be explained to the borrowers in person.

After the time period has expired for the borrower to vacate the property, the following will occur:

1. Area Directors will use the attached Exhibit A to indicate who will be the Primary RDO-FCS and the Alternate RDO-FCS. The Primary RDO-FCS will use Exhibit A to: 1. Set a sale date, 2. Request an Eviction. The Primary RDO-FCS will request removal of personal property only by emailing the rural housing section of the State Office to the attention of Rebecca Gaffney, requesting permission to post the property for 30 days and then remove and dispose of remaining items in the house. Instructions for posting the property will be provided by State Office.

2. ABANDONED VEHICLES: Abandoned vehicles can only be removed by obtaining a court order. The following procedure will apply:

a. If abandoned vehicle(s) are to be removed from property, the Primary RDO-FCS must determine the owner of the vehicle(s). This may be determined by preparing KY DMV form TC-96-16 and faxing it to Gary Semones, Kentucky Transportation Cabinet, Division of Motor Vehicle Licensing, Title Branch, Frankfort, Kentucky, Fax: 502/564-1686, phone number 502/564-2737, ext. 4033. Since Rural Development is a federal agency, there will be no charge for the search. You should note on the fax cover sheet the address of the local office where information is being mailed and state: “Rural Development is a federal agency and $2.00 fee is waived”. This form may be Downloaded from forms on the Home Page for Kentucky Transportation Cabinet http://mvl.ky.gov.

b. After receiving from DMV the name of the record owner of the vehicle, the information should be forwarded with Exhibit A to the State Office to request the vehicle be included in the Eviction Order.

One (1) vehicle can remain at the property if the Primary RDO-FCS determines this will not have an adverse affect on the foreclosure sale.

RD KY AN No.021 (1955-A & 3550)

3. Upon receipt by the Primary RDO-FCS of the “Writ of Assistance”, a date will be set with the Marshal Service or local law enforcement officials to assist with the eviction.

This date MUST be coordinated with the State Office to allow tracking of the process.

After the date for the Eviction is set, the Primary RDO-FCS will IMMEDIATELY fax to the rural housing section of the State Office, Form 1955-62, “Request for Contract Services for Custodial/Inventory Property or Program Services,” requesting eviction with a notation in the Section C loan number and subsequent loan number(s) and the date of obligation for all loans in block #5 of Form RD 1955-62. Also, include a copy of the “Obligation Request Validation” RHC OLB Screen for the primary loan. The rural housing section will forward the request to the Contracting Section.

If at any time prior to the date set for the Eviction, the Primary RDO-FCS becomes aware and verifies that the borrower has vacated the home, the rural housing section of the State Office must be notified IMMEDIATELY by telephone and Exhibit B of this AN faxed to them at 859/224-7450. The rural housing section will then immediately notify the Contracting Section to cancel the services of any movers who had been scheduled to remove the personal belongings. As a minimum, the Primary RDO-FCS must verify two days before the eviction whether the borrower is still occupying the property and if the eviction is still needed. Notification should be given as soon as possible, but no later than 12:00 NOON two (2) days before the date set for eviction. This is necessary to give adequate notification of a cancellation to the Marshal Service or local law enforcement officials and the movers.

4. The Primary RDO-FCS responsibilities on the day of the eviction include:

(A) Providing directions or escorting the movers and the U.S.

Marshal(s) and/or local law enforcement officials to the property site.

(B) Inspecting the property after the contents have been removed to determine the work has been performed pursuant to the contract.

(C) Contacting your vendor to have locks changed on the same day or day after the eviction.

If the Primary RDO-FCS does not feel comfortable remaining with the movers and the U.S. Marshal(s) during the eviction process, he/she may leave the premises and return after the work is complete to inspect the property. The Primary RDO-FCS will forward to the State Office Contracting Section an itemized and signed invoice from the movers and form RD 838-B “Invoice-Receipt Certification”. If the loan has been assumed, enter the primary loan number in item #14. Also include a copy of the “Obligation Request Validation” RHC OLB Screen”.

PLEASE NOTE: Removal of personal belongings is prohibited without an authorization from the State Director. Upon receipt of approval from the State Office, the remaining items may be disposed of at the discretion of the agency.

RD KY AN 021 (1955-A and 3550)

III. ENVIRONMENTAL CONSIDERATIONS

1. TSQ SCREEN - At the time of posting the Judgment and Order of Sale – Transaction Screen Questionnaire, ASTM Standard E-1528 (TSQ) must be completed by the Primary RDO-FCS. Questions about completing this form should be directed to Mark Waters, State Environmental Coordinator. This is pursuant to HB-1-3550, Paragraph 13.17B.

2. LEAD BASED PAINT (LBP) - If the security property was constructed prior to 1960, the property will be examined to determine the likelihood of LBP. This assessment will NOT include a formal LBP assessment, but will consider observations of age, style and condition of all structures on the property. The agency will consider a reduction from Market Value on NRV for certain repairs and possible LBP abatement.

3. MOLD – there are no known standards for removal of mold at this time. However, OGC has advised that if mold is present in the house, the following disclosure statement must be announced at the sale and included in the foreclosure ad:

“Potential buyers are hereby put on notice of the presence of various molds of an unknown origin in this house. Some forms of mold have been known to result in serious illness in occupants of homes with existing mold conditions. Rural Development makes no warranties regarding the type of mold in the house and will not assume responsibility for removing the mold. Any persons entering the home for any purpose, including inspecting the property, are hereby made aware of the presence of mold and should take whatever actions they deem necessary to protect themselves while in the house. Rural Development does not recommend entering the home without proper protection. Removal of the mold will be the responsibility of the purchaser, as well as all costs and associated liabilities.”

IV. REQUESTING AN UPDATED APPRAISAL

If the Area Office has authorization to place Blanket Purchase Agreement (BPA) Calls under a BPA issued by the State Office, and it is appropriate to use that BPA, then proceed as follows: The Area Office staff shall place a BPA call with the proper vendor, using the order sequencing procedures and other guidelines furnished to the Area Office by the contracting section at the State Office.

If the Area Office does not have authority to place BPA calls under BPA’s for appraisals, or if a different vendor is needed, then the RDO-FCSs must request an Appraisal by forwarding Form RD 1955-62 to the Contracting Section in the State Office. Form RD 1955-62 should have the following notation in Section 7C, Comments and Additional Information:

RD KY AN 021 (1955-A and 3550)

“THIS APPRAISAL IS BEING REQUESTED FOR THE PURPOSE OF A FORECLOSURE SALE. Enter and indicate the primary loan number and subsequent loan number(s) and the date of obligation for all loans in block #5 of Form RD 1955-62. Also, include a copy of the RHC OBL “Obligation Request Validation Screen”. If the request is for a different appraiser than provided under the BPA for that county, the request must so state and also provide the reasons why a different appraiser is needed.

NOTE: Prior to requesting an appraisal, all personal property must be removed either with a Court Order, or authorization from the State Director and the property broom swept. If lead based paint is a consideration, the appraiser should be advised of this.

The Oath of Appraiser (Exhibit H of this AN) will be attached to the request. It is the responsibility of the Primary RDO-FCS to ensure that the Oath of Appraiser is executed and accurately completed by the Certified Appraiser.

If the Primary RDO-FCS is of the opinion that the contract Appraisal is inaccurate, assistance from an In-house appraiser should be requested. Copies of the report should NOT be provided to any parties other than the intended user(s) stated in the report. This includes allowing prospective investors to view the appraisal. However, the recommended market value may be provided to any requesting party.

V.__ SETTING A SALE DATE ___________________________________

The sale date will be set after receipt of the appraisal. Exhibit A must be completed and returned to the Rural Housing Section of the State Office within three (3) business days of receipt of the appraisal. A sale date should be set for nine (9) weeks from the receipt of the appraisal to allow CSC sufficient time to advertise the sale and Area Office staff to obtain “Affidavit of Publication” prior to the sale date.. If Exhibit A is not received in the State Office within sixty (60) days from the date of the Judgment and Order of Sale, this will be noted on the monthly foreclosure report with an asterisk.

VI. ESTABLISHING A BID PRICE_______________________________

The original signed Exhibit G, “Oath of appraiser” and Exhibit H of this AN must be completed and forwarded to the Housing Section.

Pursuant to HB-2-3550, paragraph 6.5E, the Agency’s bid will be the lessor of the Agency’s gross investment (maximum pay-off) or the estimated net recovery value. The bid cannot be less than 67% of the market value as determined by a current appraisal. A net recovery value sheet (NRV) must be completed for each sale and item #4 completed on Exhibit H to this AN. Please attach a copy of Attachment 6-A “Net Recovery Value Worksheet” (HB-2-3550 handbook). When considering your recommendation, please review market conditions in the area the property is located, the condition of the house, etc., as these items relate to sale value when a property is sold through foreclosure.

RD KY AN 021 (1955-A and 3550)

Area Office should submit Exhibit H of this AN to the Housing Section, to request bidding instructions for the sale at the same time the sale date is set. The Net Recovery Value Sheet with the appraised value inserted on the form and the “Oath of Appraiser”, must be submitted with Exhibit H to establish the entry bid as soon as possible, but no later than three (3) business days after receipt of the appraisal.

VII. ADVERTISING THE FORECLOSURE SALE

The Contracting Section at the State Office will notify Area Directors, Area Office staff, and Housing Program Staff, of the current Blanket Purchase Agreement (BPA) number and of the name, address, phone number, and email address of the current advertising BPA holder whenever that information changes. The following procedure will apply when advertising foreclosure sales:

1. The Primary RDO-FCS will prepare Exhibit D, “Foreclosure Ad”, Exhibit E, “Affidavit of Publication”, and Exhibit F, “Delivery Ticket”, of this AN. These forms along with the Appraisal Report (all pages), the Net Recovery Value Worksheet, and the letter from the State Office authorizing the entry bid must be emailed to the following persons at the Centralized Servicing Center (CSC):

vickie.jones@stl.usda.gov carla.lee@stl.usda.gov tami.hackett@stl.usda.gov mark.schwarz@stl.usda.gov The Centralized Servicing Center (CSC) will be responsible for sending the ad to the current advertising BPA holder, sending flyers to the investors listed on Kentucky’s investor list and uploading the sale information to the nationwide web site. The current BPA holder must receive the ad one (1) week prior to the date of the first ad is to be run.

The foreclosure ad must be run for four (4) consecutive weeks and the sale held in the COUNTY WHERE THE PROPERTY IS LOCATED. The final ad must be run two (2) weeks prior to the sale date. If the Primary RDO-FCS determines the sale needs to be advertised in a second newspaper for market purposes, this must be noted on Exhibit F, “Delivery Ticket”.

2. The Delivery Ticket (Exhibit F) will be completed using the newspaper located in the county where the property is located. Please list the Area Office address that is handling the sale and the email address of the RDO-FCSs. The original “Affidavit of

Publication” is to be mailed back to the Area Office address on the Delivery Ticket.

A copy of Exhibit E, “Affidavit of Publication” must be obtained from the BPA Holder one (1) day prior to the sale date.

RD KY AN 021 (1955-A and 3550)

Page10

3. The bottom of the delivery ticket (FOR STATE OFFICE USE ONLY) will be completed. A copy of the Delivery Ticket will be mailed to the State Office Contracting Section as soon as the Delivery Ticket is e-mailed to CSC. Area Offices should keep a copy of the Delivery Ticket.

4. CSC Shall provide on a monthly basis a properly completed Form RD 838-B “Invoice-Receipt certification” and a copy of the invoice and delivery ticket to the contracting staff at the Kentucky State Office. After receipt of a properly certified invoice from CSC, the Contracting Section will forward payment approval to the NFC to make payment to the appropriate advertising BPA holder. CSC will indicate the proper account number in Block #14 of the Form RD 838-B to which the ad will be charged as a recoverable cost item to the borrower’s account.

5. If the ad will be run in two newspapers, separate advertisement will be prepared for each ad run. The Primary RDO-FCS will e-mail a photograph of the property to CSC for each advertisement.

6. Initial caretaker services should be requested by sending Form RD1955-62 to the contracting section at the State Office. The yard should be mowed, shrubs trimmed, and yard/outside debris removed to give a good, clean appearance in the photograph. If an appropriate mowing purchase order exists, place a work directive under that purchase order, otherwise include mowing on the form RD 1955-62 described above.

VIII.

MARKETING FORECLOSURE SALES

1. The Centralized Servicing Center (CSC) will be responsible for uploading the information about the sale to the USDA nationwide web site.

2. The Area Office will maintain an investor list and update the names, addresses, telephone numbers and e-mail addresses of persons who have attended previous foreclosure sales or have asked to be placed on the list. Exhibit P, “Sign-In Sheet for Foreclosure Sale Attendees” will be used at the foreclosure sale. This allows prospective bidders/investors to indicate if they would like to be added to this investor list. Please advise the State Office of any additions or deletions to your investor’s list and we will notify the Centralized Servicing Center (CSC).

3. The Centralized Servicing Center (CSC) will be responsible for mailing flyers to the investors.

RD KY AN 021 (1955-A and 3550)

4. An open house must be held prior to the sale date.

IX.

CONDUCTING THE FORECLOSURE SALE

The following will apply to conducting the foreclosure sale:

1. The Primary RDO-FCS will hold the sale at the property site.

2. Exhibit O, “Sign-In Sheet for Foreclosure Sale Attendees” is the responsibility of the Alternate RDO-FCS. Persons or Entities who attend the foreclosure sale must sign-in. Exhibit O for each foreclosure sale must be filed in the Borrower Case file as a permanent record to document persons who attended the sale. If needed, this will provide necessary documentation for a FOI request and being in compliance with ethics requirements.

3.

The sale must begin promptly at the time and place designated in the advertisement. The Primary RDO-FCS and the Alternate RDO-FCS should plan to be at the site 30 minutes before the sale starts to answer inquiries about the property.

4.

The Primary RDO-FCS will conduct the sale using Exhibit I, “Check Sheet for Conducting Foreclosure Sales”, and will certify the Check Sheet after the sale is completed.

5. Prior to the property being sold and the final bid being entered, the Primary RDO- FCS should assure an adequate opportunity has been provided each prospective purchaser to enter a bid. The Primary RDO-FCS will then announce the property has been sold and who entered the successful bid. Prospective bidders must understand the sale is not officially concluded until a Sale Bond/ Letter of Credit and the 10% deposit has been provided to the Primary RDO-FCS by the successful bidder.

6. If someone other than Rural Development enters the successful bid, Exhibit J, “Sale

Bond” will be completed by the purchaser, if the full purchase price is not paid on the date of the sale. An owner of real property in the State of Kentucky or an appropriate corporate Surety must execute the “Sale Bond” as surety. Persons who wish to be listed as purchaser(s) of the property cannot sign as a surety on the sale bond. A letter of credit from a banking institution may be substituted for the bond.

The original of the “Sale Bond” or the letter of credit will be forwarded to the Marshal’s Office along with the collected funds using Exhibit L.

RD KY AN 021 (1955-A and 3550)

NOTE: If a second lien holder on the property enters the successful bid, they are not required to execute the bond or pay the 10% down payment. Exhibit M provides an example of an approved “Letter of Credit,” used by the Banking Community. A letter from a bank stating they will make the purchaser a loan is not sufficient.

7.

If the Purchaser is not an inferior lien holder, the Primary RDO-FCS will collect a minimum of at least TEN PERCENT (10%) of the sale price from the purchaser on the DATE OF THE SALE in the form of a Certified Check made payable to the U.S. Marshal Service. It is suggested that the Primary RDO-FCS or a member of the Area Office staff accompany the purchaser to a bank to assure the funds are paid. The purchaser may pay the full purchase price on the day of the sale. Funds from the sale MUST be transmitted to the Marshal Service “NO LATER,” than the day after date of sale.

8.

At a sufficient time prior to the sale, if it appears to the Primary RDO-FCS the foreclosure sale could cause a threatening situation to himself/herself or persons interested in purchasing the property, and he/she considers it unsafe to hold the sale, assistance from the law enforcement officials will be requested by the State Office. This request should be forwarded to the State Office four weeks prior to the sale date.

X.

COLLECTING AND TRANSMITTING FUNDS

1. After collecting the down payment or full purchase price from the party who entered the successful bid, the funds will be transmitted by the Primary RDO-FCS on the day of sale or no later than the day after the sale, via CERTIFIED MAIL using Exhibit L to the U.S. Marshal Service with a copy to the contract private attorney firm or the U.S. Attorney for W.D.K. Exhibit L will also be used to notify all parties if Rural Development entered the successful bid.

2. After the sale date, the remaining balance owed for the property should be paid by the Purchaser within sixty (60) days in the Eastern District and ninety (90) days in the western district. The purchaser should be advised to send the remaining balance to the Area Office or U.S. Marshal’s office in the form of a Certified Check made payable to the U.S. Marshal Service. If for some reason the remaining balance is not paid or other arrangements made, within this time frame, the Primary RDO-FCS must immediately contact the State Office for advice. Exhibit L will also be used to transmit the final collected funds to the Marshal Service.

RD KY AN 021 (1955-A and 3550)

3. If the buyer is obtaining the remaining balance due through a lender and an exchange of the deed for the final payment on the purchase will be made, closing of the buyer’s loan may be coordinated through contract private attorney firm or the U.S. Attorney, W.D.K. Please complete item #14 of Exhibit N to this AN, providing the State Office with the name, mailing address and phone number for the financial institution and the loan closing agent. We will advise the contract private attorney firm or U.S. Attorney for W.D.K. and the Marshal’s Office that in order to receive final payment from the foreclosure sale, an exchange of the final payment for the Marshal’s Deed must be made.

4. Exhibit K may be executed by the Purchaser to allow him/her to take immediate possession of the property.

The State Director will prepare a Report of Sale and forward to the contract private attorney firm or U.S. Attorney, W.D.K. for filing with the Court upon receipt of Exhibit N, the ORIGINAL OATH OF APPRAISER AND AFFIDAVIT OF PUBLICATION FROM THE AREA OFFICE. Exhibit N with the Attachments must be forwarded by the Primary RDO-FCS to the State Director no later than ten (10) days following the sale. A delay in filing the Report of Sale will cause delays in the distribution of the sale proceeds and receipt of the Marshal’s Deed.

XI.

DEBT SETTLEMENT______________________________________

Pursuant to HB-2-3550 - Paragraph 7.14, the Centralized Servicing Center (CSC) may cancel a debt if the property sold at a foreclosure sale and there is a debt remaining after sale proceeds are applied and no deficiency judgment was obtained.

It is requested all personnel involved in the sale process follow the above directives very carefully. Mistakes in this procedure can be very costly in dollars and/or time.

If field staffs encounter any problems, please advise the State Office.

VERNON C. BROWN

Acting State Director

Attachments: Exhibits A, B, C, D, E, F, G, H, I, J, K, L, M, N, O Exhibit A (revised 5/11/09)

RD KY AN No. 021(1955-A & 3550)

DATE

SUBJECT:

Notification of Sale Date for

______________________, RH Borrower

TO:

State Director

ATTN: Housing Section

Lexington, KY

This is to acknowledge receipt of the Judgment and Order of Sale, to advise of the Sale date, the date the appraisal was ordered and the Rural Development Official designated to conduct the Foreclosure Sale (RDO-FCS).

I. _____________ The Rural Development Official designated to conduct the Foreclosure SALE (RDO-FCS) will be ________________________and___________________________________.

(PRIMARY )

(ALTERNATE)

II. _____________ A FORECLOSURE SALE DATE OF _______________________

HAS BEEN ESTABLISHED FOR THE ABOVE CASE. THE APPRAISAL HAS BEEN OR WILL BE ORDERED ON _____________________________.

III._____________ A FORECLOSURE SALE DATE CAN NOT BE ESTABLISHED-- PERSONAL BELONGINGS and/or MOTOR VEHICLES BELONGING TO BORROWER or OTHER PERSONS REMAIN ON THE PROPERTY THAT HAS BEEN DEEMED ABANDONED. TO REQUEST AN ORDER FOR MOTOR VEHICLE REMOVAL, PLEASE PROVIDE INFORMATION REGARDING THE OWNER OF RECORD OF THE VEHICLE. FOR PERSONAL PROPERTY ONLY—AN EMAIL MAY BE SENT TO rebecca.gaffney@ky.usda.gov REQUESTINGING PERMISSION TO POST THE PROPERTY FOR 30 DAYS AND TO REMOVE AND DISPOSE OF REMAINING PERSONAL PROPERTY. THIS EMAIL SHOULD PROVIDE INFORMATION ON WHEN THE PROPERTY WAS DEEMED ABANDONDED.

IV. _____________A FORECLOSURE SALE DATE CAN NOT BE ESTABLISHED

AT THIS TIME AS THE BORROWERS CONTINUE TO OCCUPY THE PROPERTY. THIS IS TO REQUEST EVICTION PROCEEDINGS BE INITIATED.

V. _____________ A FORECLOSURE SALE DATE CAN NOT BE ESTABLISHED

BECAUSE ____________________________________________.

(PLEASE PROVIDE REASON WHY THE SALE DATE CAN NOT

BE SET.)

AREA DIRECTOR OR PRIMARY RDO-FCS

__________________ AREA OFFICE

Exhibit B (revised 5/11/09)

RD KY AN No.021 (1955-A & 3550)

DATE

SUBJECT:

NOTIFICATION OF CANCELLATION OF EVICTION FOR

Account No. __________________

State Director

ATTN: Rural Housing Section

This is to advise the Eviction of the above mentioned borrower will not be required. The borrowers have vacated the property.

Please notify the United States Marshal Service and the United States Attorney or Contract Attorney my request for eviction is being cancelled.

PRIMARY RDO-FCS

_____________________________AREA OFFICE

cc: Contracting Section

State Office

Lexington, KY

Exhibit C (revised 5/11/09)

RD AN No.021 (1955-A & 3550)

Borrower Name: _________________________________________

Date Judgment Received: ________________________________

RDO-FCS(s) PREPARATION TO HOLD FORECLOSURE SALE

Initialed by two employees

With Date Completed and/or

Date Information Submitted:

Post copy of Judgment and Order of Sale on premises. Take photgraphs of property for foreclosure ad. Determine if property is occupied.

Exhibit A mailed to State Office by Area Director advising the two (2) designated employees to conduct the foreclosure sale.

After 30 days have expired from date of Judgment and Order of Sale, if needed, send Exhibit A to State Office requesting eviction. If personal property remains in property, email rebecca.gaffney@ky.usda.gov requesting permission to post the property for 30 days.

Once property is vacate and has been cleaned up, request appraisal.

O

Set sale date within three (3) business days of receiving appraisal.

Prepare Exhibit H of this AN within three (3) business days to request bidding instructions once appraisal is received. Mail Exhibit H, Original Oath of Appraiser, and the Net Recovery Value Worksheet to the State Office for bid approval by the State Director. See page 7 of this AN for further guidance on requesting a reduced bid amount.

Exhibit C (revised 5/11/09)

RD KY AN No. 021 (1955- A & 3550)

Exhibit D, “Foreclosure AD”; Exhibit E, “Affidavit of

Publication”; Exhibit F, “Delivery Ticket; the Appraisal Report

(all pages); the Net Recovery Worksheet; and the letter authorizing entry bid from the State Director will be emailed to the following persons at CSC requesting the foreclosure be advertised and held in the COUNTY WHERE THE

PROPERTY IS LOCATED, the flyer be sent to persons on

Kentucky’s investor list, and the web site for RD foreclosure sales be uploaded. Please email this the all four (4) people:

vickie.jones2@stl.usda.gov carla.lee@stl.usda.gov tami.hackett@stl.usda.gov mark.schwarz@stl.usda.gov _______ ________ Obtain COPY of Exhibit E, “Affidavit of Publication” from current Advertising BPA holder prior to the sale.

Use Exhibit J, Checklist for Conducting Foreclosure Sales, to hold foreclosure sale.

Submit Exhibits J (Sale Bond) and Exhibit L (Transmittal memo to U.S. Marshal) with 10% down payment to Marshal’s Service with copy of the Exhibits to the State Office, Contract Private Attorney firm or U.S. Attorney Office, W.D.K. no later than the next day after holding the sale.

Submit the original signed Exhibit E, Affidavit or Publication, to the State Office using Exhibit N of this AN WITHIN TEN (10) DAYS following the Sale. The Court WILL NOT confirm the foreclosure sale OR ISSUE A MARSHAL’S DEED IF THE REPORT OF SALE HAS NOT BEEN FILED WITH THE COURT. Issues with obtaining the Affidavit of Publication may be resolved with the current BPA holder.

Advise the State Office (by completing item #14 on Exhibit N of this AN) if there will be a need for an Exchange of the Marshal’s deed for the Final Payment. This occurs if the purchaser will be financing the property with a lender.

I certify the above initialed items have been completed according to RD KY AN No. 021(1955-A & 3550).

PRIMARY RDO-FCS Date

ALTERNATE RDO-FCS Date

Exhibit D (revised 5/11/09)

RD KY AN No.021 (1955-A & 3550)

GOVERNMENT FORECLOSURE SALE

(1)

(2) at

(3)

(4)

____________, KY

of

HOUSE AND LOT

(address of property)

(attach photo here)

EXAMPLE:

“This is a nice three bedroom brick veneer home on city water and city sewer. It is well located in a quiet neighborhood. It consists of a living room, kitchen, three bedrooms, and one bath. This property is considered suitable for the Rural Development, Housing Program. This would be an excellent buy for an investor interested in rental property or for resale after minor repairs.”

An open house will be held on _______________________.

“The minimum acceptable bid for this property is $________.”

Payment of the current year’s property taxes are the responsibility of the purchaser.

Clear title to this property is not warranted. The U.S. Marshal’s Deed is not a general warranty deed. Buyers are advised to have the property’s title examined. Written notification regarding encumbrances on the property must be made to the ____________ Rural Development Office within 30 days.

“The above is considered the upper half of the ad.”

Exhibit D (revised 5/11/09)

RD AN KY No. 021 (1955-A & 3550)

LEGAL NOTICE

Notice is hereby given that on ______(1)_____, at _____(2)_____, at _____(3)_____, _____(4)_____, Kentucky, in order to raise the sum of $_____(5)_____ principal, together with interest credit subsidy granted in the amount of $_____(5)_____, plus interest in the amount of $_____(5)_____ as of _____(6)_____, and interest thereafter on the principal at $_____(5)_____ from _____(6)_____, until the date of Judgment, plus interest on the Judgment amount (principal plus interest to the date of Judgment) at the rate of _____(7)_____%, computed daily and compounded annually, until paid in full and for the costs of this action, pursuant to Judgment and Order of Sale, being Civil Action No. _____ (9) _____ on the _____ (10) _____ Docket of the United States District Court for the _____ (11) ____ District of Kentucky, entered on _____ (12), in the case of United States of America vs. _____ (13) _____, the following described property will be sold to the highest and best bidder:

(14)

Being all the same property conveyed by deed dated _____ (15) _____, And recorded in Deed Book _____ (15) _____, at Page _____ (15) ____, _____ (15) _____ County Clerk’s Office.

TERMS OF SALE: Ten percent (10%) of the bid price (in the form of a Certified Check made payable to the U.S. Marshal) on the day of the sale with good and sufficient bond for the balance, bearing interest at the rate of _____ (7) _____% per annum until paid, due and payable in ____ (8) ____ days and said bond having the effect of a Judgment. Upon a default by the Purchaser, the deposit shall be forfeited and retained by the U.S. Marshal as a part of the Proceeds of the sale, and the property shall again be offered for sale subject to confirmation by the Court.

This sale shall be in bar and foreclosure of all right, title, interest, estate claim, demand or equity of redemption of the defendant _(16)_ and of all persons claiming by, through, under or against them, provided the purchase price is equal to two-thirds of the appraised value. If the purchase price is not equal to two-thirds of the appraised value, the Deed shall contain in a lien in favor of the defendant _ (16) _ reflecting the right of the defendant _ (16) _ to redeem during the period provided by law (KRS 426.530). Under law, the purchaser is deemed to be on notice of all matters affecting the property of record in the local County Clerk’s Office.

Inquiries should be directed to:

_________ (17) ________, RURAL DEVELOPMENT AREA OFFICE

_____ (18) _____, Kentucky

Telephone: ____ (19) ____

Note to Publisher: Legal Notice will be in 8 pt type and the upper half will be in bold type.

Exhibit D (revised 5/11/09)

RD KY AN No. 021 (1955-A & 3550)

INSTRUCTIONS FOR PREPARATION OF THE ADVERTISEMENT

(1) The day of the week and the date on which the sale will be held.

(2) The time of day at which the sale will be held.

(3) The location where the sale will be held. NOTE: The sale will be held at the property address unless an exception is granted by the State Director.

(4) The city and/or county where the sale will be held.

(5) The amounts of the principal, interest credit subsidy, interest and daily interest accrual set out in the Judgment (the phrase regarding interest credit subsidy may be deleted if it is not applicable).

(6) The date to which interest has been accrued (as set out in the Judgment).

(7) The interest rate on the judgment amount (will be supplied by the State Office).

(8) For the Eastern District insert: 60 days; For the Western District insert: 45 days.

(9) The civil action number found on the Judgment.

(10) The division (e.g., London, Ashland, Lexington).

(11) The District (e.g., Eastern or Western)

(12) The date the Judgment was entered.

(13) Name the defendants (e.g., John Smith, et al.)

(14) The legal description (if it’s fairly short) or a brief description of the property.

(15) Information identifying the deed conveying the property to the defendant(s).

(16) Make this word plural, if appropriate.

(17) The name of the Area Director.

(18) The city in which the Area Director’s Office is located.

(19) The telephone number of the Area Office.

Exhibit E (revised 5/11/09)

RD KY AN No.00 (1955-A & 3550)

AFFIDAVIT OF PUBLICATION

I, _______________________________________________, Authorized person for Advertising

BPA holder or publisher of _____________________, a newspaper of general circulation in _________________________County, Kentucky, at

_______________________, Kentucky, do solemnly swear that from my own personal knowledge, and reference to the files of said publication, the advertisement (attached below) in Civil Action No.

__________ on the ___________ docket of the United States District Court, ___________

District of Kentucky in the case of ________________________________________________

Was inserted in the issues of the ______________________________, as follows:

DATE

LINES OR INCHES

TOTAL COST: ______________________

Signature: ______________________________________________________

Publisher or Authorized person for Advertising BPA Holder Subscribed and sworn before to before me this _______________day of ____________A.D. 20___.

My Commission Expires ______________________, 20___.

_________________________________________________Notary

Exhibit F (revised 5/11/09)

RD KY AN No. 021 (1955-A & 3550)

DELIVERY TICKET

BPA NUMBER:

(current BPA number) Borrower Name:

NEWSPAPER(S) TO RUN AD

NUMBER OF TIMES TO RUN

RUN DATES

OFFICE ADDRESS: _____________________________________________

(e-mail address of designated persons holding the sale)

TELEPHONE:

FAX:

(Authorized Signature)

FOR RURAL DEVELOPMENT AREA OFFICE USE: Complete the following State Code (20 or 21) ______________________County Code: _____________________________ Borrower Primary Loan Number (only) _______________________________________________ Date of Original Obligation of Loan: ______________________________________

NOTE: Original “Affidavit of Publication” must be mailed to the Kentucky Area Office address listed above. A copy of the “Affidavit of Publication” must be faxed to the above designated persons holding sale prior to the sale date.

Exhibit G (revised 5/11/09)

RD KY AN No. 021 (1955-A & 3550)

UNITED STATES DISTRICT COURT

__________DISTRICT OF KENTUCKY

CIVIL ACTION NO. _______________

UNITED STATES OF AMERICA,

PLAINTIFF

VS.

OATH OF APPRAISER

DEFENDANT(S)

I, the undersigned, a Kentucky Certified/Licensed Appraiser holding Registration Number ________, having been duly sworn, state:

1. That I have no interest in the property being appraised and am not related by blood, marriage or otherwise to any of the parties to the foreclosure action;

2. That I am aware of the provisions under 38 U.S.C. Subsection 208 and I disqualify myself or anyone else acting on my behalf from bidding on the property which I have appraised;

and

3. That I have appraised the fair market value of the property which is the subject of the above-captioned action to be $___________________________.

APPRAISER

Subscribed and sworn to before me by ___________________________________, Certified Appraiser Number ___________________, this ________ day of

__________________________, 20___.

NOTARY PUBLIC, KY STATE AT LARGE

My Commission Expires: ________________

Exhibit G (revised 5/11/09)

RD KY AN No. 021 (1955-A & 3550)

INSTRUCTIONS FOR PREPARATION OF OATH OF APPRAISER

**(ITEMS 1, 2, AND 3 MUST BE COMPLETED BEFORE OATH OF APPRAISER IS FORWARDED TO APPRAISAL UNIT/ CONTRACTOR APPRAISER FOR COMPLETION)**

1. List appropriate division as shown on Judgment and Order of Sale.

2. List Docket Number as shown on Judgment and Order of Sale.

3. List Defendant(s) names exactly as shown on judgment and Order of Sale.

Appraiser should complete the remaining blanks included on the Oath of Appraiser and forward back to your office with the appraisal.

NOTE: THE ORIGINAL OATH OF APPRAISER MUST BE FORWARDED TO THE STATE OFFICE BEFORE THE STATE DIRECTOR CAN ISSUE BIDDING INSTRUCTIONS.

Exhibit H (revised 5/11/09)

(date)

SUBJECT: __________________________________, Rural Development Foreclosure Account

Request for Bidding Instructions

State Office

Attn: Rural Housing

Please provide the bidding instructions for the subject foreclosure sale to be held on

1. Delinquent unpaid property taxes are as follows:

(NOTE: If taxes have not been paid by CSC, Area Offices must check with County

Court Clerk for delinquent taxes.)

2. The property is ___________________________ for the program.

(suitable/ unsuitable)

3. The present market value as indicated by the RD appraisal is $____________________.

4. This is to request that RD’s bid be reduced to __________________________________.

(up to 67% of appraised value)

5. The Net Recovery Value Worksheet is attached.

6. Original Oath of Appraiser is attached.

PRIMARY RDO-FCS

Area Office

Exhibit I (revised 5/11/09)

RD KY AN No. 021 (1955-A & 3550)

CHECKLIST FOR CONDUCTING FORECLOSURE SALES

Name of Borrower: ____________________________________________________

Date of Foreclosure Sale: _______________________________________________

_____ ______ A copy of Exhibit E, “Affidavit of Publication” obtained and filed in borrower case file prior to the foreclosure sale.

Exhibit O, “Sign-In Sheet For Foreclosure Sale Attendees”, with names of persons attending the sale must be reviewed before the sale starts by the Primary RDO-FCS. Exhibit O must be filed in the borrower case file.

An announcement was made to individuals at the sale that the sale will begin at stated time and specifically where you will hold sale (e.g. living room of house or black barn next to house).

The Notice of Sale was read as published in the newspaper.

A statement was made as to the dates the Notice of Sale was published in the particular newspaper.

A statement was made that a copy of the Judgment and Order of Sale is available for inspection by prospective purchasers. (NOTE: A copy of the Judgment and Order of Sale must be taken to the sale site.)

A statement similar to the following was made to begin the bidding process: “I will now accept bids on this property. A bid in the amount of $ _______ is entered on behalf of Rural Development.”

A statement similar to the following was made to end the sale: “I have a bid in the amount of $____________ for this property and on the count of three, unless a higher bid is entered, the property will be sold.”

Sale Bond, Exhibit J, of RD KY AN 021 (1955-A & 3550) was executed by Purchaser and surety.

An amount of at least 10% down payment in the form of a Certified Check was paid by Purchaser on the date of the sale and forwarded to the U.S. Marshal Service.

RDO-FCS discussed with purchaser as to whose name(s) were to be included in the Marshal’s Deed and are recorded as follows: _______________________________.

I certify the above checked items have been completed according to RD KY AN No. 021 (1955-A & 3550)

PRIMARY RDO-FCS

ALTERNATE RDO-FCS

________________________Area Office

Date: ___________________________

Exhibit J (revised 5/11/09)

RD KY AN No. 021 (1955-A &3550)

UNITED STATES DISTRICT COURT

____(1)_____ DISTRICT OF KENTUCKY

__________(1)_____________________

CIVIL ACTION NO. _________(2)________________

UNITED STATES OF AMERICA

PLANTIFF

VS.

_____________(3)________________

______________(3)_______________

DEFENDANT(S)

SALE BOND

We, __________________________________(4)____________________________________

Purchaser(s) and ____________________(5)____________________________________________, As Surety, promise and agree to pay to the United States Marshal for the ________(6)____________ District of Kentucky, the sum of ______________(7)_______________, said amount to be paid on terms of ten percent (10%) of the bid price paid on the day of sale, with good and sufficient bond for the balance, the balance being due and payable within ___ (8)___ days from the date hereof, and said bond having the effect of a Judgment, the same being the balance of the purchase price bid at auction this date for property sold by Rural Development, as the representative of the United States Marshal for the _______(6)_______ District of Kentucky in the above-styled action.