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VA: Circular 26-19-24: Servicer Loss Mitigation Letters on Delinquent Loans

Updated 9/25/19: The VA issued Circular 26-19-24 – Change 2.

Circular 26-19-24 – Change 2 (full circular)


Updated 9/9/19: The VA issued Circular 26-19-24 – Change 1.

Circular 26-19-24 – Change 1 (full circular)


Investor Update
August 19, 2019

Source: VA

1. Purpose. This Circular provides guidance and instructions to mortgage loan servicers concerning servicer collection letters on Department of Veterans Affairs’ (VA) guaranteed home loans to delinquent borrowers in accordance with Title 38, Code of Federal Regulations.

2. Background. VA has a longstanding policy of encouraging servicers to work with 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 regulation requires servicers to establish contact with a delinquent borrower during various stages of delinquency. Under CFR 36.4317(c), Servicers are required to report to the Secretary specific loan events in accordance with the timeframes described for each event. Unless otherwise specified, servicers are required to report these events monthly.

3. Guidance. Below is the guidance for sending VA required loss mitigation letters to the borrower.

a. The servicer sends the required VA loss mitigation letter to the borrower as required by CFR 36.4350(g)(1)(iv) when the following occurs:

(1) in the case of a default occurring within the first 6 months following loan closing or the execution of a modification agreement pursuant to CFR 36.4315, within 45 calendar days after such payment was due; or

(2) in the case of any other default, within 75 calendar days after such payment was due. b. The required VA loss mitigation letter shall:

(1) provide the borrower with a toll-free telephone number and, if available, an e-mail address for contacting the servicer;

(2) explain loss mitigation options available to the borrower;

(3) emphasize that the intent of servicing is to retain home ownership whenever possible; and

(4) must contain the following language:

The delinquency of your mortgage loan is a serious matter that could result in the loss of your home. If you are the veteran whose entitlement was used to obtain this loan, you can also lose your entitlement to a future VA home loan guaranty. If you are not already working with us to resolve the delinquency, please call us to discuss your workout options. You may be able
to make special payment arrangements that will reinstate your loan. You may also qualify for a repayment plan or loan modification.

VA has guaranteed a portion of your loan and wants to ensure that you receive every reasonable opportunity to bring your loan current and retain your home. VA can also answer any questions you have regarding your entitlement. If you have access to the Internet and would like to obtain more information, you may access the VA web site at www.benefits.va.gov. You may also speak to a VA Loan Technician by calling 1-877-827-3702.

The last sentence in the above required language has been updated to reflect the correct telephone number for Veteran borrowers to call. Mortgage servicers will include the updated information to better serve Veterans.

4. Additional Guidance for Servicers. Mortgage servicers of VA-guaranteed loans are required to report that the loss mitigation letter has been mailed to the borrower and the date the letter was mailed.

a. There are three options to provide confirmation of the loss mitigation letter for VA review at the time of the Adequacy of Servicing (AOS) process. They are as follows:

(1) The servicer shall upload the servicer case notes with the required documentation as part of the AOS process. The case note shall either be highlighted or uploaded as a separate document for easy identification in the VA Loan Electronic Reporting Interface (VALERI) application.

(2) Servicers may include confirmation that the loss mitigation letter has been mailed in addition to the date the letter was mailed as a part of the first AOS question.

(3) Servicers may upload a copy of the loss mitigation letter into VALERI and title the document “Loss Mitigation Letter.” The presence of the loss mitigation letter in the VALERI application will be confirmed at the time the AOS process is completed.

b. All Post Audits performed on terminated VA-guaranteed loans will now include a copy of the loss mitigation letter as a required document. The loss mitigation letter will be uploaded into the VALERI application as part of the post audit package.
The letter will be clearly titled as “Loss Mitigation Letter.”

5. Guidance for VA Loan Technicians.

a. VA Loan Technicians will verify servicers have documented that the loss mitigation letter has been mailed to the borrower and the date the loss mitigation letter was sent in servicer case notes or as part of the response to AOS question number one.

b. If the servicer opts to upload the mitigation letter into the VALERI application, the Loan Technician shall verify that the letter has been uploaded as part of the AOS process. The presence of the uploaded document, or lack thereof, will not be a determining factor of adequate servicing.

c. Loan Technicians will, as part of the post audit process, verify that the loss mitigation has been uploaded by the servicer.

d. Servicers who fail to meet the requirements as described above, will receive a regulatory infraction for violating CFR 36.4317(c) and CFR 36.4350(g)(1)(iv).

6. Effective Date. This requirement is effective October 1, 2019.

7. Contact Information. Inquiries may be directed to valerihelpdesk.vbaco@va.gov.

8. Rescission: This Circular is rescinded October 1, 2020.

By Direction of the Under Secretary for Benefits

Jeffrey F. London
Director, Loan Guaranty Service

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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