---
kind: "section"
citation: "7 C.F.R. § 3555.305"
title: "7"
number: "3555.305"
heading: "Voluntary liquidation."
url: "https://uscodex.org/cfr/7/3555.305"
---

# §3555.305. Voluntary liquidation.


The lender must have exhausted the servicing options outlined in [§§ 3555.302 through 3555.304](/cfr/7/3555.302..3555.304.md) to cure the delinquency before considering voluntary liquidation. The methods of voluntary liquidation of the security property outlined in this section may be used to protect the interests of the Government.

- (a) **Eligibility.** To be eligible for voluntary liquidation, the following conditions must be met:
  - (1) The loan is at least 30 days delinquent or meets the imminent default definition as outlined in [§ 3555.303(a)(2)](/cfr/7/3555.303.md?p=a-2);
  - (2) The default was caused by an involuntary reason; and
  - (3) The borrower must presently occupy the property except in situations where the borrower does not occupy the property due to the same involuntary reason that led to the default.
- (b) **Pre-foreclosure or short sale.** The borrower may sell the security property for a price that represents its fair market value. The sale price, less any reasonable and customary sale or closing costs incurred by the borrower, must be applied to the borrower's account.
- (c) **Deed in lieu of foreclosure.** The lender may accept a deed in lieu of foreclosure if it will result in a lesser loss claim than if foreclosure occurs.
- (d) **Offer by junior lienholder.** If a junior lienholder makes an offer in the amount of at least the anticipated net recovery value, as calculated in accordance with [§ 3555.353](/cfr/7/3555.353.md), the lender may assign the note and mortgage to the junior lienholder.
- (e) **Other methods of voluntary liquidation.** The lender may propose other methods of voluntary liquidation that are consistent with this section if the lender fully documents how the proposal will result in a savings to the Government.

## Notes

### Amendments

[78 FR 73941, Dec. 9, 2013, as amended at 84 FR 70886, Dec. 26, 2019]

### Authority

Authority: 5 U.S.C. 301; 42 U.S.C. 1471 et seq.

### Source

Source: 78 FR 73941, December 9, 2013, unless otherwise noted.

### Amendments

[78 FR 73941, Dec. 9, 2013, as amended at 84 FR 70886, Dec. 26, 2019]