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VA Circular 26-17-10: Department of Veterans Affairs Affordable Modification

Investor Update
April 7, 2017

1. Purpose. This Circular provides guidance and instructions for modifying Department of Veterans Affairs (VA) guaranteed loans, which replaces previous guidance issued regarding the VA Home Affordable Modification Program (HAMP). VA-guaranteed loans should be considered for a VA Affordable Modification (VAAM) when traditional home retention options are not feasible.

2. Background. VA has a longstanding policy of encouraging servicers to work with Veteran borrowers to explore all reasonable options to help them retain their homes, or when that is not feasible, to mitigate losses by pursuing alternatives to foreclosure. In an effort to help homeowners avoid foreclosure, VA introduced the VA HAMP-Style Modification in accordance with the Making Home Affordable (MHA) program.

3. Guidance. A VAAM offers a new monthly mortgage payment (including principal, interest, property taxes, insurance, and condominium or homeowners’ association fees (PITIA)) no greater than 31 percent of the borrower’s monthly gross income. The VAAM must bear a fixed-interest rate. The rate must not exceed the most recent Freddie Mac Weekly Primary Mortgage Market Survey Rate for 30-year fixed rate conforming mortgages (US Average), rounded to the nearest one-eighth of one percent (0.125 percent), as of the date the modification agreement is approved, plus 50 basis points. In addition, the rate cannot be more than one percent higher than the existing interest rate on the loan, as of the last paid installment. The servicer must evaluate the loan for a VAAM prior to determining the loan is insoluble.

a. VA allows servicers to use a VAAM on any VA-guaranteed loan, subject to the requirements in 38 C.F.R. 36.4315, and preapproval must be obtained for any regulatory deviation. The VA guaranty amount on a VAAM will be calculated pursuant to 38 C.F.R. 36.4315(a)(13) which could impact the maximum guaranty amount on the modified loan.

4. Servicer Evaluates Loan for VA Affordable Modification. If the servicer is unable to contact the borrower to obtain financial information, or if the borrower declined to provide financial information, then evaluation for a VAAM style modification cannot be completed. If verified financial information indicates insufficient income to justify a traditional loss mitigation option, then the servicer will use the financial information obtained to evaluate the possibility of a VAAM. A VAAM will use a mortgage debt to income standard rather than VA’s traditional residual income method found in 38 C.F.R. 36.4340.

5. Determination of VA Affordable Modification Terms. Servicers will calculate the estimated new principal balance in accordance with 38 C.F.R. 36.4315(a)(10) with respect to allowable costs that may be included in the modified indebtedness.

a. Servicers may reduce the interest rate and extend the terms to achieve the target monthly

PITIA payment. If principal deferment is necessary to achieve the target monthlymortgage payment, it must be non-interest bearing and either paid, or refinanced by the maturity date. If none of these measures result in the target monthly PITIA payment, then servicers must pursue alternatives to foreclosure.

b. Standard VA servicer incentives apply.

6. Effective Date of VA Affordable Modification. The VAAM option must be implemented on or before October 1, 2017.

7. Rescission: This Circular is rescinded April 1, 2019.

By Direction of the Under Secretary for Benefits

Jeffrey F. London
Director, Loan Guaranty Service

Source: VA

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties