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VA Circular 26-17-39: Updated Disaster Modification Guidance

Updated 1/4/19: The U.S. Department of Veterans Affairs (VA) issued a change to Circular 26-17-39 that extends the rescission date of the original circular.

Link to Circular 26-17-39 Change 2

Updated 5/8/18: The U.S. Department of Veterans Affairs (VA) issued a change to Circular 26-17-39 that clarifies the VA’s position on re-amortization when required through investor guidelines.

Link to Circular 26-17-39 Change 1

Investor Update
November 27, 2017

1. Purpose. This Circular provides guidance regarding Department of Veterans Affairs (VA) new Disaster Loan Modification option, and describes updated measures mortgagees may employ to provide relief. Mortgage servicers, and borrowers alike should continue to review VA’s Guidance on Natural Disasters to ensure Veterans receive the assistance they need. (http://www.benefits.va.gov/homeloans/documents/docs/va_policy_regarding_natural_disasters.pdf).

2. Background. The VA Disaster Loan Modification allows servicers to extend permanent payment relief to impacted delinquent borrowers when the borrower has not submitted a complete loss mitigation application. All impacted borrowers should have an opportunity to be considered for a VA Disaster Loan Modification as long as the eligibility requirements are met. Servicer evaluation of the borrower’s financial information was replaced by a three- month trial payment plan (TPP). Pre-approval was automatically granted for 38 C.F.R. 36.4315(a)(3) requiring borrower’s creditworthiness to be evaluated under the criteria specified in 38 C.F.R. 36.4340. Servicers are encouraged to continue VA Disaster Loan Modification Solicitation efforts throughout the delinquency, and the foreclosure process up to 12-months after the federally-declared disaster. Servicers should refer to VA Servicer Handbook, M26-4, Chapter 21, for specific eligibility requirements, and additional guidance. (https://www.benefits.va.gov/WARMS/M26_4.as

3. New Disaster Loan Modification Option. Servicers have the choice, but are not required to offer a VA Disaster Loan Modification to delinquent borrowers impacted by a disaster without the three-month TPP requirement. A permanent modification must meet the following terms to be eligible for execution without the three-month TPP. The term of the loan is extended equal to the number of months the loan is delinquent. For example, if the loan is four-months delinquent, the loan term may only be extended by four months. The loan must have been current at the time of the disaster that caused the delinquency. The servicer waives the delinquent interest accrued on the loan as a result of the delinquency. The liability of the Secretary will not be increased when servicers waive the delinquent interest allowing for the modification to be completed without a TPP. The limit of the term extension is 12-months without prior approval from VA. The desired result is that Veteran borrowers are able to resume the same regular monthly installments without feeling as though they have been financially penalized due to a disaster.

A three month TPP will still be required for all Disaster Loan Modifications that do not forgive the delinquent interest.

VA Disaster Loan Modifications are subject to the conditions outlined in VA Servicer Handbook, M26-4, Chapter 21. Servicer evaluation of the borrower’s financial information is not required. Pre-approval is automatically granted for 38 C.F.R. 36.4315(a)(3) requiring borrower’s creditworthiness to be evaluated under the criteria specified in 38 C.F.R. 36.4340. The servicer must send a VA Disaster Modification agreement to the borrower for signature, and return the agreement. The servicer may spread any escrow account shortages over a 5 year (60 month) period. Servicers are encouraged to continue VA Disaster Loan Modification solicitation efforts throughout the delinquency, and the foreclosure process, up to 12 months after the federally-declared disaster. In addition, the servicer may seek pre-approval from VA prior to completion of the VA Disaster Loan Modification for any issues that are outside of the policy guidance provided.

5. Rescission: This Circular is rescinded January 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