VA Home Loans

As of May 8, 2024, Chapter 5 is effective. Servicers should consider borrowers for all available options in Chapter 5 prior to offering VASP. If it appears the borrower would be eligible for VASP, servicers should hold these files until they are operationally ready to process VASP requests.

Unless there are CFPB requirements to collect new documents for the borrower (i.e. documents could be too old to make a proper decision), the servicer can use the documents they have in hand. Servicers can proceed with loss mitigation options that are in-process/in-trial.

Late fees are the only item that would not be capitalized. Servicers are to waive these fees.

We recognize there may be times when the servicer is unaware or unable to pay the tax and insurance payments early. If the loan hasn't transferred, servicers are to pay those bills as they come due.

This will be reconciled during the service transfer. If the borrower is current with their HOA payments, no action is needed by the servicer. If the HOAs are behind, servicers should be reinstating the HOAs and including that amount in the payoff. As a reminder, if the HOA has placed a lien on the property that jeopardizes VA’s first lien position, the loan is not eligible for VASP until that lien has been resolved.

See VA Servicer Handbook, Chapter 9 section 9-8

Servicers are to review and offer available home retention options in the prescribed waterfall, however, we cannot require the servicer to offer those options listed for disaster situations.

VASP isn't available to non-owner occupants.

We're not making an exemption to this requirement. If the event or circumstance that caused the default isn't resolved and is expected to re-occur in the future, then a more appropriate loss mitigation like forbearance should be utilized until the said circumstance is overcome.

Servicers should use commonly accepted practices (ex. removed power meter, unkept lawn, abandoned/untagged vehicles, posted notices of utility shutoff) or local/state law for determination of abandoned property.

We'll be updating guidance to include a waiver of the 1% interest rate cap for loan modifications. In the meantime, if a pre-approval to waive this requirement is submitted, our loan technician will approve the request.

Once VA makes a determination to accept a VASP loan, and the servicer has made a good faith effort to review the file within requirements, there are no repurchase requirements.

If the timeframe specified within the indemnification agreement has expired, VA would allow VASP. VA would also allow VASP on an indemnified loan, if the indemnification was the result of an action taken by the lender. If the indemnification resulted from fraudulent actions on behalf of the borrower, VA would not allow VASP.

The servicer would not be required to re-review the borrower under the new Chapter 5 if a decision was rendered before May 8, 2024, but could if they determined a re-review is needed. The servicer would continue with the current approved loss mitigation offer.

We'll accept and retain all loans where VA returns an accepted VASP event, and the servicer transfers the loan to VA and under no circumstance will we transfer a loan back to the servicer.

While failure to comply with VA regulations and policies, such as not providing proper documentation or establishing an erroneous interest rate or loan amount, would not result in the loan being transferred back to a servicer, we may take such action(s) as determined necessary including, issuing a bill of collection for any loss to the government caused by the servicer’s actions or temporarily or permanently barring a servicer from servicing or acquiring guaranteed loans. See 38 C.F.R. §§ 36.4328(c) and 36.4336.

Servicers should take appropriate steps to reconcile any information that may conflict with a Veteran’s statement that the home is owner occupied.

For example, if the Veteran’s mailing address is in another state, the servicer should inquire as to the discrepancy in confirming occupancy status.

Servicers must ensure every effort to obtain information as to any tax, insurance, and HOA payments in super lien states due within the next 90 days and as necessary.

Servicers should advise the Veteran that collection of this information is an important part of the VASP process. Payoff statements are to include all tax, insurance, and HOA bills in super lien states available through such efforts.

We'll review a pre-approval on its own individual merit to ensure the home retention option is in best interest of the Veteran.

The servicer is charged with protecting VA’s first lien position. Delinquent HOA dues where action has been initiated in a super lien state represent risk to VA’s lien position. A servicer must pay the HOA bill in a super lien state if a borrower indicates they are behind, or the title search indicates a lien has been filed. The servicer should perform a good faith effort to obtain the HOA bill, however, other forms of documentation are acceptable to validate the amount due.

Our expectation is that the payoff amount and the modified loan amount match. VA has always modified the loan under VA Purchase for the amount of the purchase claim. Late fees are the only item that would not be capitalized and included in the modification. Servicers are to waive these fees.

We'll reconcile any impound advances made during the transfer process. We will not make a reconciliation payment after the payoff has been completed for administrative costs and fees or late charges.

Servicers must provide a payoff statement with payoff date valid through 30 calendar days and servicers should project interest through the last day of the month preceding the first payment due date under the VASP loan modification.

For example, if the first payment due under the VASP modification is Oct. 1, interest should be included through Aug. 31.

A borrower must be three full months behind in payments to meet the qualifying criteria for VASP. This means the loan will be due for the fourth payment, at the time of the VASP review.

Yes, the loan will transfer to us.

The revised Chapter 5 replaces the prior version. It outlines all loss mitigation options that may be offered by servicers without VA preapproval. Loss mitigation options that were approved or offered by the servicer before May 8, 2024, may be completed.

In cases where the servicer did not approve or offer a loss mitigation option before May 8, 2024, the servicer should continue any loss mitigation review pursuant to VA Servicer Handbook, Chapter 5 and Appendix F.

The servicer would not be required to re-review the borrower under the new guidance if a decision was rendered before May 8, 2024, but could if they determined a re-review is needed. The servicer would continue with the current approved loss mitigation offer.

In limited situations, VA would allow a Successor in Interest (SII) to qualify for VASP. Chapter 9 outlines qualifying criteria for VASP as, “the borrower is the current legal owner of record on the property.”

Therefore, if the SII is obligated on the original note or has completed an assumption, they would meet this criterion. If not, they would not qualify for VASP.

Chapter 5 and VASP do not require financial evaluations.

A SII could qualify for VASP if they are an obligor on the loan or other loss mitigation options. In certain cases, an assumption may be necessary, and servicers should continue to follow current policies and procedures regarding assumptions. For more information about VASP and assumptions, lease refer to Chapter 9 of the handbook.

No, an assumption and a VASP cannot be completed simultaneously. To meet the VASP qualifying criteria related to the current legal owner, the borrower needs to have completed an assumption prior to the current default episode.

No, VASP is a no documentation program for the borrower. If the borrower advises they have reinstated the past due HOA payments, servicers are able to move forward with the VASP review.

If the property is in a super lien state and the borrower cannot confirm the HOA payments are current and/or will not allow the servicer to advance funds on their behalf, the loan does not meet the qualifying criteria for VASP.

Not all HOA liens or judgments would result in a superior lien or threaten VA’s first lien position. Servicers are to follow state law and determine if a judgment or lien placed by an HOA would jeopardize VA’s first lien position. If the HOA in a super lien state has placed a lien on the property that jeopardizes VA’s first lien position, the loan does not qualify for VASP until the lien has been resolved.

Texas Veteran Land Board (TVLB) loans are allowed for VA purchase. However, not all TVLB loans may be purchased through the VASP program. Loans that originated with two Notes under the TVLB program (likely, originating prior to 2005) are to be reviewed under the Traditional VA Purchase (tVAP), to ensure the outstanding value of both Notes is reflected correctly in the purchase. Servicers should refer TVLB loans with two Notes to the assigned VA Loan Technician. Loans that originated with one Note may be reviewed under VASP.

Because VASP qualifying criteria is considered at the time of the VASP TPP event, a bankruptcy filed after a servicer submits the VASP TPP event is considered an interruption in the TPP, rather than a failed or cancelled loss mitigation option.

To ensure the servicer has time to obtain court approval and the borrower is still committed to home retention (i.e., VASP), servicers are to pause the VASP TPP plan at the time of bankruptcy filing and seek court approval for the VASP . Once court approval has been granted to move forward with the VASP Loan Modification, servicers will send a new, re-established TPP agreement to the borrower(s) outlining the due dates for three consecutive monthly payments, as outlined in Chapter 9.06. Upon receipt of the third trial payment, the servicer is to report the TPP Complete event within the timeframe outlined in Chapter 9.07. If the borrower does not make three timely payments under the new, re-established TPP, this would be considered a failed TPP, and servicers are to report the TPP Complete event with indication of an unsuccessful TPP. Similarly, if the servicer is unable to obtain court approval to proceed with VASP, this would be considered a failed TPP, and servicers are to report the TPP Complete event with indication of an unsuccessful TPP.

Yes. Since the TPP is not a VA requirement, if a borrower fails a TPP for a loss mitigation option in the waterfall prior to VASP, that does not mean the borrower moves to the VASP option.

If the borrower meets the criteria for options in the waterfall prior to VASP, the borrower will still be reviewed for those options. Servicers are reminded that any unnecessary overlays that push Veterans that are not qualified for VASP are not in the letter and spirit of the waterfall. We'll monitor servicer actions and take appropriate actions to maintain servicer compliance.

No, this would not meet the qualifying criteria for VASP, as the borrower must make the six monthly payments, either since loan origination or the most recent modification. The borrower may be considered for VASP in the future, if they make the requisite additional payments on the loan.

Yes, borrowers with a buydown agreement in place can be considered for VASP. Servicers are to review the buydown agreements and determine appropriate steps, based on the individual buydown agreement. For example, if a buydown agreement allows funds to be applied to an unpaid principal balance (UPB), then servicers are able to proceed with the application of buydown funds, in accordance with the agreement, and reflect the lower UPB on the VASP payoff statement. VA cannot provide legal advice or a legal interpretation of a buydown agreement prior to purchase, so servicers are encouraged to work with their legal counsel in ensuring the buydown funds are handled appropriately.

VA Servicer Handbook, Chapter 9.04 directs servicers to confirm with the borrower that HOA payments are current. If the pending HOA payments put the VA-guaranteed loan’s first lien position at risk (i.e., super lien states), servicers are to advance funds to reinstate any past due HOA payments. Funds advanced by the servicer for past due payments can be included in the VASP payoff amount and will be included in the VASP loan. If the past due HOA payments do not jeopardize the VA-guaranteed loan’s first lien position, then no action is needed.

As a reminder, if the HOA in a super lien state has placed a lien on the property that jeopardizes VA’s first lien position, the loan does not qualify for VASP until the lien has been resolved. See VA Servicer Handbook, Chapter 9.04.b.6. While past due HOA payments can be included in the VASP payoff amount, liens and/or judgments, including related fees or costs, for past due HOA payments, cannot be included.

Any unapplied funds or funds in suspense in an equal to or greater than one payment on the loan should be applied to the borrower’s account to reduce overall indebtedness on the loan. Any amount less than one payment on the loan may be included on the VASP payoff statement. VA will not certify the VASP payment if the VASP payoff statement reflects unapplied funds or funds in suspense equal to or greater than one payment on the loan, and will direct servicers to apply such funds and submit a new payoff statement. Servicers are not allowed to hold payments in suspense in order to meet VASP qualifying criteria.

No, these items are not allowed in the VASP payoff amount.

A deferred balance can be included in the VASP payoff amount if it is associated to the VA-guaranteed loan, there is an agreement in place indicating the balance will be deferred without accruing interest, and the amount is not secured by a second mortgage. Examples of allowed deferred balances would include a VA Affordable Modification (VAAM) with a deferred portion of the unpaid principal balance (UPB) or a deferred UPB under the pandemic response VA Loan Deferment program (see VA Circular 26-24-03). Items such as an amount that VA determined did not qualify for assistance under the COVID-19 Veterans Assistance Partial Claim Payment (COVID-VAPCP) or COVID Refund Modification programs (i.e., a previously denied partial claim) or a second mortgage are not allowed.

If a servicer includes a deferred balance in the VASP payoff amount, servicers should clearly indicate the impact of this capitalization in the VASP Loan Modification agreement or another associated document. Language should include the previous terms of the deferred agreement and clearly outline the amount being capitalized with the new interest rate and terms. Servicers are to indicate the deferred balance will be subject to a monthly payment schedule, under the terms of the VASP Loan Modification.

Servicers are to follow the guidance in VA Servicer Handbook, Chapter 9.08 with regards to allowed fees and costs in the VASP payoff. If the VA Loan Technician identifies the items listed below, they may adjust the VASP payoff amount reported in VALERI (i.e., VASP Total Indebtedness), as follows:

• Late Charges: The VA Loan Technician will reduce the VASP payoff amount by the amount reflected as late charges. Per Chapter 9.08(a)(3), servicers are to waive these fees.
• Positive Escrow: The VA Loan Technician will increase the VASP payoff amount by the amount reflected as positive escrow balance. Per Chapter 9.08(a)(3), escrow funds do not reduce the total indebtedness or VASP payoff. These funds should remain in escrow to cover future advances.
• Delinquent Interest: The VA Loan Technician may request an updated payoff statement if the servicer has included additional interest, outside of the allowed amount in Chapter 9.08(a)(3). If an updated payoff statement is not received in a timely manner, VA will pro-rate the allowed interest and reduce the amount to reflect the appropriate interest to date.

Any adjustments by VA to the VASP payoff amount will be annotated in VALERI and available in the VASP Servicing Purchase Status Report.

There may be circumstances where VA may not certify the VASP payment. For example, in cases where the VASP payoff amount indicates there are unapplied funds or funds in suspense equal to or greater than one payment on the loan, VA will not certify the VASP payment as application of the funds may affect whether VASP qualifying criteria are met. Additionally, VA will not certify the VASP payment if VA identifies an issue with the VASP payoff statement, requests a corrected statement, and the servicer does not provide the corrected statement within 5 business days.

No, VA does not have a required format for a VASP payoff. The VASP payoff is used as evidence to support the reported VASP Total Indebtedness amount and should follow the guidance outlined in VA Servicer Handbook, Chapter 9.08.