National Financial and Accounting Operations Center Presented by Tony Bainbridge, NFAOC Director National Financial and Accounting Operations Center Farm Service Agency NACS/NASE National Convention Kansas City, MO June 25, 2017 – June 29, 2017

NFAOC Agenda Guaranteed Loan Updates – Sharon Sachs Loss Information Signatures on Form FSA-2254 Reminder on Cancellation of Guaranteed Loan Debt Guaranteed Loan Restructures Direct Loan Updates – Cindy Haas Hot Topic Reminders Financial Operations/Reporting Division Updates – Tony Bainbridge Pre-Authorized Debits (PAD) 1-FLP – Emergency Check Request Electronic Funds Transfer (EFT) Debt Collection Improvement Act – Tony Bainbridge Background Information Guaranteed Loan DCIA Referral Process TOP and Cross-Servicing Program How You Help Farm Service Agency Comply with Direct Loan Certifications NFAOC Contact Information

Loss Information – Farm and Community Services Branch On 05/04/17, a change was made in the Guaranteed Loan System to the Loan List Screen and the FSA Loan View Screen to display additional information in the Status field to indicate if a loss has been paid. The change was made to help servicing offices easily determine if any loss payment had been made to a borrower who is requesting a new guaranteed loan.  Example 1 – A loan with a bankruptcy reorganization loss (Type 5 Loss), could have been terminated paid-in-full if the borrower completed the bankruptcy plan.  Previously the Status would just display “Terminated Paid in-Full,” but now it will display, “Terminated-Paid in Full – With Loss.” Example 2 – A borrower could continue operations with an active loan after a debt restructure loss (Type 6 or 7).  Previously, the Status would display, “Active,” but now it will display, “Active – With Loss.”     Sharon Sachs, 314-679-6804

Loss Information – Farm and Community Services Branch The new statuses that you may now see include the following: Terminated-Paid in Full-With Loss – When a loan had a loss paid, prior to the loan being paid in full. Previously the Status displayed only “02 = Paid in Full”.  This is possible with Loss Types 5,6,7,8,9,10,13. Terminated-Lender Request-With Loss – When a loan had a loss paid, prior to the loan being terminated due to the Lender’s request.  Previously the status displayed “05 = Lender Request”.  This is possible with Loss Types:  5,6,7,8,9,10,13. Active-With Loss – When a loan is still active but a loss has been paid.  Previously the Status displayed “01 = Active”. This is possible with Loss Types:  1,5,6,7,8,9,10,13. Sharon Sachs, 314-679-6804

Loss Information – Farm and Community Services Branch You may also still see the following statuses, which have not changed: Active – When no loss has been paid and loan is still active. Terminated-Paid in Full - When no loss has been paid and loan has been terminated with a status report and the Principal and Interest Balances are zero. Terminated-Lender Request - When no loss has been paid and loan has been terminated with a status report and the Principal and/or Interest Balances are greater than zero. Terminated – Loss Paid –  When the loan was terminated by the processing of a loss. Terminated – Loss w/Recovery –  When the loan was terminated by the payment of a loss and a later recovery has been received. This is only on loans that are not eligible for Debt Offset.  Terminated – Consolidation – When the loan is terminated by a consolidation.  The old loan is terminated and combined with one or more other loans to create a new loan for this borrower.  Terminated – Transfer/Assumption – When the loan is terminated by a Transfer/Assumption.  The loan is terminated for the original borrower and assumed by a new borrower. Sharon Sachs, 314-679-6804

Guaranteed Loan Report of Loss Signatures on Form FSA-2254 – Farm and Community Services Branch Guaranteed Loan Report of Loss These Loss types require a Lender signature and two FSA signatures: Type 1 Estimated Loss (Payment issued) Type 2 Final Loss Type 5 Bankruptcy Loss Type 6 Debt Restructure without Shared Appreciation Type 7 Debt Restructure with Shared Appreciated Type 8 Interest Loss Only Sharon Sachs, 314-679-6804

Guaranteed Loan Report of Loss Signatures on Form FSA-2254 – Farm and Community Services Branch Guaranteed Loan Report of Loss These Loss types do not require a Lender signature, but do require at least one FSA signature: Type 4 Recovery after Type 2 Loss Type 9 Shared Appreciation Recovery (Full sale of property) Type 10 Shared Appreciation Recovery (Partial sale of property) Type 13 Recovery after Type 5, 6, or 7 Loss Type 14 Recovery after Type 2 Loss Sharon Sachs, 314-679-6804

Reminder on Cancellation of Guaranteed Loan Debt – Farm and Community Services Branch 2FLP Paragraph 363K states: “…Where it has been a minimum of 6 years since the last collection, FSA will cancel the debt without application according to 7-FLP, paragraph 402 B, as appropriate. For guaranteed loans the lender is the cross servicer. After 6 years with no collections, FSA's documentation that the lender anticipates no future collection satisfies the return from cross servicing requirement of 402 B…” The statement in the red text above is referring to the Borrower, not the individual Loan. When reviewing Report GLSDC54, Inactive Receivables Report, remember that this report is listing all loans that have not had a collection received in the last 6 years. It is possible that we are receiving collections on another loan for the borrower so before requesting that the debt be written-off, please verify that we aren’t receiving collections on another loan for this borrower. 2FLP Paragraph 363K goes on to say: “…Where it has been 6 years since the debt was established and collections are less than accruing interest, FSA will cancel the debt without Application…” This statement was just added in May 2017, but it may be changing. The Program Staff in WDC is considering just stopping interest accrual and continuing to collect on the debt. They are looking at this possibility. Sharon Sachs, 314-679-6804

Guaranteed Loan Restructures – Farm and Community Services Branch A completed Form FSA-2249 is needed if the Lender is changing the terms of a loan. An extension of the Maturity Date is considered a Restructure and a FSA-2249 should be completed and submitted to the NFAOC. The Maturity Date CANNOT be extended beyond the terms allowed in 2-FLP, even if ordered by the bankruptcy court. Per 7 CFR 762.145, the Maximum Maturity Dates allowed are: OL-LOC – The earlier of the Re-Amortization Effective Date + 7 years or the Loan Closing Date + 10 years (Exception: If ordered by bankruptcy court, LOC’s that are fully secured by Real Estate may be extended to the Re-Amortization Effective Date + 15 years, like a regular OL.) OL – The Re-Amortization Effective Date + 15 years FO – The Loan Closing Date + 40 years CL – The Loan Closing Date + 30 years Sharon Sachs, 314-679-6804

Distribution of Payments To Loan Hot Topic Reminder – Farm Services Branch Distribution of Payments To Loan There seems to be some confusion as to how extra payments on FLP loans are distributed. Per 4-FLP [7 CFR 765.154]: The Agency applies both regular and extra payments to each loan in the following order, as applicable: Administrative costs and protective advances plus interest Deferred non-capitalized interest Accrued deferred interest Interest accrued to date of payment Loan principal According to FLP Policy, the only way for an extra payment to be applied to principal is if the borrower pays his regularly scheduled installment on the same day as the extra payment Cindy Haas, 314-457-4121

Hot Topic Reminder – Farm Services Branch NRRS Issues If a correction to a NRRS remittance is required, Field Office personnel should not delete the remittance in NRRS. This action generates a 2C to PLAS/ADPS, which will cause issues. To make a correction to a NRRS remittance without deleting it, please: Call Sue Eilertson at 202-690-9142 Sue will walk through the step-by-step changes required Deobligations Field Office personnel can do their own deobligations if it meets the following criteria: Those with no advances Prior Fiscal Year with no advances Cindy Haas, 314-457-4121

Hot Topic Reminder – Farm Services Branch ECM or Remedy Ticket If there are servicing reminders on the DLS Dashboard that you cannot remove, please submit a remedy ticket. FaSB cannot change or remove anything on the DLS Dashboard. If unsure, please contact your State Office and/or DAFLP staff for guidance. Change in Application of Payment Currently, the Change in Application of Payment is submitted via NRRS. This is causing the NFAOC more time researching and correcting the issue because we have to look at all of the payments on the Schedule of Remittance. The NFAOC and FSA has agreed that all changes in application of payments (FSA 2429) be submitted to FaSB via ECM. When a correction is made in NRRS, there is no direct feed to ADPS, as some seem to think. The report is generated to the NFAOC, which does not indicate what account needs corrected, and there is no contact information. Cindy Haas, 314-457-4121

Hot Topic Reminder – Farm Services Branch Check Requests – 4A/4D Do not complete a 1C Check Request in DLS the same day you complete a 4A/4D in DLS When this occurs, the 1C processes and appears the funds are disbursed, when in reality the funds have not been disbursed. At this point, FaSB will have to issue an Emergency Check Request. 4A vs. 4D 4A – Change for a specific loan 4D – Change to all loans for a particular borrower 4A - County office personnel are only allowed to make changes from one county to another—not one state to another. Only FaSB can make the change from one state to another. In this instance, please do not delete the 4A—leave it on DLS and contact FaSB, who will then process the transaction. Cindy Haas, 314-457-4121

Pre-Authorized Debits (PAD) - Cash Management Collections Branch All States are eligible to participate Currently, FLP has 1,174 active PAD Agreements PAD has several payment frequencies available. Those include: Weekly, Bi-Weekly, Monthly, Quarterly, Semi-Annual, and Annual PAD is easy, convenient, secure and free of charge Offer PAD as an option to our Customers Edwin Henry, 314-457-4037

Requesting an Emergency Check 1–FLP – Emergency Check Request – Administrative Funds Control Branch Requesting an Emergency Check Emergency Check requests should be a rarity and used ONLY in true emergency situations, such as: An unexpected foreclosure sale U.S. Marshal’s sale Similar delinquent real estate taxes (to protect FSA’s interest, and ONLY in States with NO Right of Redemption) FMMI System Issue Other problem affecting the ability to process a timely TY document Fax the completed FSA – 2126, the completed FSA – 2172, and the Document Chain Report to the Administrative Funds Control Branch’s ECM Fax Number, 844-655-2428 Pat Dingess, 314-679-6730

Electronic Funds Transfer (EFT) – Cash Management Disbursements Branch EFT Validations EFT Validations are NO LONGER handled by the Servicing Branches. The NFAOC Cash Management Disbursements Branch (CMDB) is now handling EFT Validation requests and inquiries.  CMDB accepts any signed EFT validation form.   Requests are accepted via fax or email to RD.NFAOC.CMDB@stl.usda.gov. Please send Faxes to 314-457-4371. Contact CMDB via Telephone at 314-457-4031 if you have any questions. EFT validation requests received by 3:00pm CST will be processed on the day received.  Requests received after 3:00pm will be processed the next business day.  Due to Internal Control and process improvement requirements, the appropriate handbooks will be updated in the near future. Linda Schmidt, 314-457-4111

Debt Collection Improvement Act – Debt Collection Improvement Branch Debt Collection Improvement Act (DCIA) of 1996 Digital Accountability and Transparency Act of 2014 To find information on the background and provisions of DCIA, reference: Handbook 7-FLP, Direct Loan Servicing- Debt Collection and Resolution, for Direct Loans Handbook 2-FLP, Guaranteed Loan Making and Servicing, for Guaranteed Loans All inquiries regarding debt referral should be directed to the Debt Collection Improvement Branch. Lisa Randolph, 314-679-6851

Guaranteed Loan DCIA Referral Process Debt Collection Improvement Act – Debt Collection Improvement Branch Guaranteed Loan DCIA Referral Process All DCIA actions for guaranteed losses are initiated in the Guaranteed Loan System (GLS) All loans closed in GLS with an application date after July 20, 2001 are eligible for Treasury Offset. Once a final liquidation loss is processed, the Offset Receivable Record is created in GLS. The field office should send the 60-Day Due Process Letter to the borrower and all co-borrowers. The date of the letter and the Exhibit 17 or 18 should be updated in GLS. After review of the response or therefore lack of response, the field office should select the box in GLS to refer the debt for Internal Administrative Offset (IAO), as appropriate. After 60 days, the State Office assesses the borrower’s situation and determines if the borrower should be referred. If determined eligible for referral, the State Office will update in GLS to refer the debt to the Treasury Offset Program (TOP). New debt is referred to Treasury on a quarterly basis and a TOP Notification Letter is generated from GLS to all borrowers and co-borrowers, notifying them that their federal debt has been referred to Treasury for offset. GLS also sends weekly updates of the balances to Treasury. FLP Guaranteed losses are not sent to Treasury for the Cross Servicing Program. The lender is considered our cross-servicer since they are still trying to collect on this debt. Lisa Randolph, 314-679-6851

Cross – Servicing Program Treasury Offset Program Debt Collection Improvement Act – Debt Collection Improvement Branch Cross – Servicing Program (Direct Loans Only) Debt must be referred to TOP first. System used – FedDebt All Agency collection efforts must stop Uses multiple collection tools: Private Collection Agency (PCA) Department of Justice (DOJ) Litigation Administrative Wage Garnishment Payment Agreements Treasury Offset Program Demand Letters Treasury Offset Program Referral required at 120 days (Required by DATA Act) Centralized offset process that intercepts eligible federal and state payments of payees who owe delinquent debts to federal and state agencies that have submitted their debt information to Treasury for collection. Federal and State funds disbursed are subject to offset. System used - TOP Web Client Agency collection efforts should continue. Types of Payment Offset: Federal/State Tax Refunds Vendor Payments Salary Offset/OPM Retirement Social Security/Railroad Retirement Lisa Randolph, 314-679-6851

Debt Collection Improvement Act – Debt Collection Improvement Branch How You Help Farm Service Agency Comply with Direct Loan Certifications TOP Quarterly Selection Process Each Quarter, ALL borrower status is reset to ELIGIBLE Ensure the appropriate delete codes are on the accounts during the selection period. This removes the borrower from the selection and certification processes for that Quarter. Cross-Servicing Referrals Process original 3K transactions per 7-FLP, Part 8B After 3K is processed, submit FSA 2721 to DCIB via ECM Fax at 314-457-4478 Cross-Servicing Recalls/Cancellations For debts ELIGIBLE for recall from Cross-Servicing, submit FSA-2722 with supporting documentation to DCIB via ECM Fax at 314-457-4478. If applicable, ensure transaction code 3K is reversed Complete guidance in 7-FLP, Part 8C and 8D Lisa Randolph, 314-679-6851

NFAOC Contact Information You may locate all NFAOC Branch Contact Information on our SharePoint site. Please click here to access the NFAOC SharePoint.

Tony Bainbridge, Director National Financial and Accounting Operations Center  Rural Development Tony.Bainbridge@stl.usda.gov Office: 314-457-4150 www.rd.usda.gov USDA is an equal opportunity provider, employer, and lender.