Safeguard Properties - VA Loan Servicing and Claims Procedures Modifications

VA Loan Servicing and Claims Procedures Modifications

Tuesday, 05 June 2007

The Department of Veterans Affairs (VA) has issued a second supplemental notice regarding a proposal to amend the Loan Guaranty regulations related to several aspects of the servicing and liquidating of guaranteed housing loans in default, and submission of guaranty claims by loan holders. The VA has reopened the comment period and is now accepting public comments concerning the supplemental information provided in this notice.

VA published a notice of proposed rulemaking in the Federal Register on February 18, 2005 (70 FR 8472), to amend regulations concerning the servicing and claims submission requirements on VA-guaranteed home loans.

Included in the proposed rule were requirements for reporting information to VA. Under the Revised Reporting Requirements, the VA stated that all loan holders would be required to electronically report information to the VA by use of a computer system, and that VA would be providing more specific information on this system prior to implementation.

As the VA progressed in developing its tracking system necessary to receive reports from loan servicers, it more clearly defined the system events and data elements. VA published more detailed information on those data elements and events in a supplemental notice dated November 27, 2006 (71 FR 68948).

Public comments in response to that notice and the original proposed rules expressed concern that providing the amount of data requested by VA (and the corresponding need to adapt industry servicing systems to provide this data) would be extensive and time-consuming. The comments also expressed a desire for careful testing of all aspects of the new electronic reporting requirements.

In response to these comments, VA proposes a phased implementation by industry segment and submits the following for public comment.

Proposed Phased System Implementation
VA proposes to implement its new, computer-based tracking system over an approximately 11-month timeframe, with program participants grouped into nine segments that will ``go live'' on VA's new system during designated phases of implementation. Each phase of implementation will incorporate time for data clean-up, system modifications, defect corrections, testing of interfaces and data transmission, and review of lessons learned before initiating the next phase

Industry Segmentation Decisions
VA proposes to phase-in the implementation based on criteria unique to several industry segments. By implementing the new tracking system in this way, VA's goal is to bring on board the largest number of loans as early as its system can handle them, while also taking into account the number of servicers, the extent of servicers' interfaces, the types of loan portfolios, and other unique testing factors that VA can anticipate at this stage. The nine industry segments identified in this supplemental notice account for all current program participants. Each segment would have a corresponding effective date for the phased-in implementation

Proposed Effective Dates of New Rules
The effective date for each industry segment would correspond to the to the date that segment ``goes live'' on the new system. Final implementation of the new rules would occur approximately 11 months after publication of the final rule. Table with approximate effective date anticipated for each industry segment is available in the full document.

Proposed Exceptions to the Effective Dates of the New Rules
The notice elaborates on three exceptions to the phased implementation for the new rules, meaning that all program participants would be subject to these proposed exceptions upon the date of the final rules' publication. These exceptions can be implemented immediately because they are not dependent on the new tracking system.

Anticipated Effect of the Phase-in on Veterans and the Lending Industry
Under the existing rules, veterans experiencing payment problems receive financial counseling and other assistance from VA to help them avoid foreclosure whenever possible. Under the new rules, loan servicers would be responsible for providing similar assistance to veterans and VA would be assuming an oversight role, monitoring the servicers' direct intervention, while retaining the ability to intervene on the veteran's behalf when necessary.

Proposed Clarification on Servicer or Holder
For purposes of tier ranking and loss mitigation options and incentives the VA's intent is to measure performance of the actual loan servicer and reward it accordingly. In order to make this distinction clearer, VA proposes to add a new definition in Sec. 36.4301 to describe the duties, responsibilities and rights of servicers

Proposed Clarifications on Loan Modifications
VA proposed extensive changes to the existing rule in Sec. 36.4314 to clarify the conditions under which a loan holder could modify an existing loan without the prior approval of VA. In reviewing the proposed rule VA realized that there were two aspects of it that remained confusing and in need of clarification.

To view the full document, including the specific questions that the VA is requesting comments, please click here.

Comments must be received on or before June 15, 2007. All comments previously received following publication of the proposed rule and the supplemental notice referenced above are being considered and do not need to be resubmitted

Any questions or comments should be directed to
Mike Frueh, Assistant Director for Loan Management (261)
Veterans Benefits Administration, Department of Veterans Affairs
810 Vermont Avenue, NW.
Washington, DC 20420
Tel. 202-273-7325.

For additional information please click on the following links.

VALERI (VA Loan Electronic Reporting Interface) page

Implementation Letter

Implementation Schedule

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Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, OH and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees and a handful of contractors performing services in the Midwest, to a national company with over 425 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.