A proposal to implement a new policy to help veterans and servicemembers pay their mortgages needs further revision if it is to work as intended, the American Bankers Association said in a letter to the Department of Veterans Affairs.
The VA Home Loan Guaranty Program gives veterans and servicemembers access to VA-guaranteed loans provided by private lenders, such as banks and mortgage companies. Congress last year granted the program authority to implement a new partial claim option for borrowers experiencing financial hardship. In March, the VA proposed new policies to implement that change and develop a new loss mitigation waterfall framework.
In its letter, ABA said a major concern is language contained in the proposed “partial claim attestation document” that suggests borrowers personally liable to the VA for repayment of the partial claim and that the debt may be collected in the same manner as other debts owed to the U.S. “These statements appear inconsistent with the servicer advance structure described in the draft policy, under which the borrower does not incur a direct debt obligation to VA through execution of the attestation,” the association said.
ABA also recommended several changes to improve the overall loss mitigation framework and partial claim process. They include simplifying and aligning the Chapter 5 loss mitigation waterfall with other federal housing programs, permitting a combined modification and partial claim option, providing clearer standards governing borrower re-entry into the waterfall, and improving operational timelines and documentation processes associated with the partial claim payment and reimbursement framework.
“With these revisions, the VA can implement a loss mitigation and partial claim program that is operationally workable for servicers, clearly understood by borrowers, and aligned with the successful loss mitigation frameworks used in other federal housing programs,” ABA said.
