VA HAMP
Frequently Asked Questions
Last Updated: January 27, 2010
1. Q: Where can I find information related to VA’s HAMP program?
A: www.homeloans.va.gov/valeri.
asp
2. Q: Are servicers required to evaluate borrowers for VA HAMP?
A: Yes. VA requires that servicers first evaluate traditional home retention loss mitigation options. If these options
cannot provide an affordable payment, the servicer must evaluate the loan for a VA HAMP modification prior to
deciding that the default is insoluble and exploring alternatives to foreclosure such as DIL or a compromise sale.
TREASURY REQUIREMENTS
3. Q: Are there any loan origination criteria requirements for the VA HAMP program, similar to the Treasury
requirement that the loan be originated on, or before, January 1
st
, 2009?
A: No. All VA loans are eligible for VA HAMP consideration.
4. Q: What are the VA HAMP-specific seasoning requirements?
A: There is no VA HAMP seasoning eligibility criteria. However, all modifications, including VA HAMP, continue to
be subject to CFR 36.4815 (a) requiring that at least 12 payments have been made since the closing date of the
loan. Servicers must contact the assigned Loan Technician at a VA Regional Loan Center to obtain prior
approval to modify loans with fewer than 12 payments.
5. Q: Does VA require trial modifications?
A: VA is giving servicers authority to execute HAMP modifications in accordance with the Treasury guidelines,
which require a three month trial period prior to execution of the final modification; however, there is no three
month trial period prior to referring a loan to VA for refunding consideration.
6. Q: Do servicers need to sign a participation agreement with Treasury to offer the VA HAMP program?
A: No. VA does not require servicers to sign a participation agreement with Treasury to offer the VA HAMP
program.
7. Q: Are servicers required to submit any Treasury HAMP forms such as those for Trial Mod, Hardship
Affidavit, Form 4506-T, etc?
A: Servicers are required to follow the Treasury guidelines for processing HAMP reviews and completing
modifications. When referring cases to VA for refunding consideration, upload all available information to
VALERI.
8. Q: Does VA have a mandated solicitation letter specific to VA HAMP?
A: No. VA does not have a VA HAMP solicitation letter. However, servicers should continue to use the standard
loss mitigation language established in 38 CFR 36.4850, and may use their own HAMP solicitation letters for
delinquent borrowers.
9. Q: Will VA also be participating in the Treasury Home Affordable Foreclosure Alternatives (HAFA)
program?
VA HAMP
Frequently Asked Questions
Last Updated: January 27, 2010
A: No. VA does not currently intend on participating in the HAFA program. VA has already delegated authority to
servicers to complete short sales and deeds-in-lieu, and requires consideration of such alternatives prior to
foreclosure.
10. Q. What source do we use to determine the cap rate for the step rate mod (FHLMC weekly rate or VA
monthly published rate)?
A. Follow the Treasury guidelines, which require the FHLMC weekly rate.
REPORTING AND RECORDING
11. Q: Are servicers required to report VA HAMP modifications pursuant to the Treasury HAMP?
A: VA does not require servicers to complete a Servicer Participation Agreement (SPA) which requires reporting on
HAMP modifications. For servicers with existing SPAs, they should report in accordance with their agreements.
12. Q: Does VA require servicers to record loan modification agreements with the county?
A: Recording of loan modification agreements is not specifically required by VA. However, VA does require that
the loan holder maintain a lien of proper dignity to secure the VA-guaranteed loan (38 CFR 36.4828(b)(1)). In
some jurisdictions this may require recordation of any modification to the original loan terms.
13. Q: How should VA HAMP modification information be reported in VALERI?
A: Reporting for VA HAMP modifications should be executed in the same fashion that a traditional modification is
reported. VA is currently considering the addition of a VA HAMP indicator in VALERI and will keep servicers
informed regarding any future reporting requirements. However, VA continues to encourage servicers to provide
information in loan notes, including details of any trial modifications implemented at the discretion of the servicer.
14. Q: If the VA increases the guarantee amount, will they be issuing a new certificate?
A: VA does not issue new guaranty certificates when the guaranty amount changes pursuant to 38 CFR36.4815(h).
NPV MODELS
15. Q: What are the VA Guaranteed Loan NPV Test, Conventional Loan NPV Test and VA NPV Test?
A: The VA Guaranteed Loan NPV and Conventional Loan NPV tests are tests run by servicers to evaluate VA
loans for HAMP modifications or referral to VA for refunding consideration. Both tests are subject to
requirements issued by Treasury. Servicers will first run the VA Guaranteed Loan NPV test, which means run
their “normal” NPV test as if the loan were guaranteed by VA. If the test recommends modification, then the
servicer will modify the loan subject to VA HAMP guidelines. If the test recommends foreclosure, the servicer will
then run the test again with the same information with the exception being that the VA Guaranty is removed. This
is known as the Conventional Loan NPV test. If the Conventional Loan NPV test recommends modification, the
Servicer will notify VA to consider the loan for refunding. The VA NPV test is an internally developed NPV test
available only to VA Loan Technicians to assist in the determination of refunding.
16. Q: Why do servicers have to run two NPV tests?
A: The VA Guaranty represents a favorable and immediate return to the servicer. The VA Guaranteed Loan NPV
includes the Guaranty to determine if a servicer executed HAMP modification is beneficial. However, in most
cases, the presence of the VA Guaranty will cause servicer NPV models to return a “foreclose” decision. The
VA HAMP
Frequently Asked Questions
Last Updated: January 27, 2010
Conventional Loan NPV test negates the influence of VA Guaranty for the purposes of determining if refunding
and modification by VA might prevent unnecessary foreclosure.
17. Q: Does VA have a NPV model that Servicers can use to evaluate borrowers for VA HAMP?
A: VA is leveraging Treasury guidelines regarding NPV models. Under this guidance, servicers may use
proprietary NPV models provided that those models meet Treasury requirements. The VA HAMP program does
require servicer NPV tests to, in one scenario, include the VA Guaranty and under another scenario, omit the VA
Guaranty. This flexibility is required as a means to evaluate the borrower for VA HAMP modification or refunding.
UNDERWRITING
18. Q: Does the Treasury Standard Modification Waterfall model apply when calculating the 31% Target
Payment?
A: Yes.
19. Q: VA uses Net Income not Gross for DTI, which should be used for this program as HAMP used Gross
Income to 31% for eligibility, is VA ok with using Treasury guideline of Net Income * 1.25 to get Gross
Income?
A: Servicers must use gross income, pursuant to Treasury guidance. Net income (such as non-taxable disability
income) should be multiplied by 1.25 to obtain a corresponding gross income amount.
20. Q: Does VA require use of the Treasury DTI (Debt To Income) ratios?
A: VA is giving servicers authority to execute HAMP modifications in accordance with the Treasury guidelines,
which utilize the front-end DTI ratio in calculating an affordable mortgage payment, which in turn impacts the
NPV decision as to whether or not the loan will be modified to achieve that payment. It appears to VA that the
“back-end” DTI need only be calculated if the Servicer will be executing a VA HAMP modification, and further
examination needs to be made as to ability to maintain all obligations. VA standard underwriting protocols are
found in 38 CFR 36.4840, and may provide a different answer on creditworthiness than a back-end DTI ratio,
although VA believes notifying a borrower of the availability of housing counseling may often be helping in
avoiding future default when a modification is completed.
21. Q: Should the affordable payment under VA HAMP include escrow shortages?
A: Follow the Treasury guidelines on pages 11 and 12 of Supplemental Directive 09-01 about escrow requirements
for treatment of escrow advances (capitalization in the modified loan amount) and shortages (appropriate actions
in accordance with applicable laws, rules, and regulations, to eliminate shortages).
22. Q: How should servicers treat unemployment, disability or rental income?
A: Follow Treasury guidelines on income consideration, which can be found on page 6 of the Supplemental
Directive 09-01. Please visit
https://www.hmpadmin.com for additional information.
CURRENT LOANS
23. Q: Can current loans be solicited for the VA HAMP program?
VA HAMP
Frequently Asked Questions
Last Updated: January 27, 2010
A: No; however, if the borrower contacts the servicer warning them of “imminent danger of default” servicers may
consider that borrower for loss mitigation options, including the VA HAMP program. See Circular 26-09-17
for
more information on obtaining VA approval for modifying current loans.
24. Q: What is the VA definition of a “current loan”? Circular 26-09-17 implies that it is any loan less than 61
days past due.
A: VA considers a current loan any loan that is not delinquent. The reference in 26-09-17 to 61 days past due is in
regards to actions eligible for incentives. Any loan modification (including VA HAMP) that is completed on loans
that are not reportable defaults (61+ days past due) will not earn an incentive payment.
25. Q: What is the VA timing for approval to modify a current loan with imminent default? Prior to the trial
modification period, or during the trial modification period?
A: Servicers will receive approval to modify a current loan (whether for VA HAMP or for a normal modification) prior
to the trial modification period, pursuant to the guidance in Circular 26-09-17.
VA REFUNDING
26. Q: If we email the VA with a suggested Refunding and we don’t receive a response within 7 days, to whom
do we escalate?
A: Servicers should escalate to a Servicing Officer at the assigned Loan Technician’s RLC. A list of Servicing
Officers by RLC can be obtained at www.homeloans.va/valeri.
asp
.
27.
Q: In item 4.a it states that “if a decision is made to NOT proceed with a refunding…” How will the VA
notify us if they decline the refunding?
A: The assigned Loan Technician will e-mail the Servicer with VA’s decision.
28. Q: Item e of the circular states that verification sent to the VA must include but is not limited to total
eligible indebtedness, borrowers expected gross income, and expected monthly escrow amount. Later in
the paragraph it says if insufficient information is provided they will cut our interest. What are the other
items they "could" need and how can we know in advance of submission so as not to have the interest
cut?
A: At this time, we expect servicers to submit sufficient information for a VA loan technician to underwrite a refund
decision. We believe that the items listed will be sufficient, and will issue further guidance if necessary.
FEES AND INCENTIVES
29. Q: Will VA reimburse servicers for fees associated with Automated Valuation Models (AVM) or BPOs
ordered to support VA HAMP NPV calculations?
A: No. AVM and BPO fees for the purposes of HAMP evaluation are not reimbursable. However, if a loan is
seriously delinquent when HAMP is considered, and the servicer would otherwise be proceeding with foreclosure
and ordering a VA liquidation appraisal, then that cost may be included in computing the claim under guaranty.
30. Q: Do Servicers receive incentive payments for HAMP approved loans? Section C.2 states that the servicer
doesn’t get incentives issued by the Department of the Treasury.
VA HAMP
Frequently Asked Questions
Last Updated: January 27, 2010
A: Loans that are reportable defaults at the time the modification is completed (VA HAMP modifications and normal
modifications) will receive normal VA modification incentives. Treasury will not pay additional incentives on VA
loans modified according to the Treasury HAMP program.
31. Q. Can the expense of a BPO be passed on to the borrower as a required contribution or can it be
capitalized since the VA is not reimbursing?
A. VA is authorizing servicers to execute HAMP modifications in accordance with the Treasury guidelines.
Supplemental Directive 09-01, on page 22 under "Administrative Costs", prohibits charging the borrower to cover
administrative processing costs, and requires the servicer to pay any actual out-of-pocket expenses, including
any property valuation fees. Therefore the fees may not be passed on to borrowers or capitalized.
32. Q. Can we capitalize attorney fees and costs?
A. The guidelines also preclude requiring the borrower to make any up-front cash contribution. Because attorney
fees and costs incurred in the foreclosure process are legitimate expenses that are typically chargeable to
borrowers, VA will allow capitalization of these expenses in any HAMP modification. We have also been
considering revision to our regulations to allow this on other modifications, but have not been able to publish that
change yet.
ELIGIBILITY
33. Q: If the servicer previously executed a traditional modification for a borrower, can they be considered for
VA HAMP?
A: Yes. Borrowers can be considered for HAMP modification even if their loan had been modified in the past. If
the prior modification was completed less than 3 years ago, the servicer must obtain prior approval from VA for
the new modification, in accordance with 38 CFR 36.4815.
34. Q: Is a divorced non-Veteran spouse, previously listed on the Note and subsequently awarded the home in
the divorce decree, eligible to qualify for a VA HAMP?
A: Yes. The surviving spouse or divorced spouse is eligible for all loss mitigation and alternatives to foreclosure
options available, including VA HAMP.
LIENS AND LOAN TYPES
35. Q: Two liens exist on the property and the second lien holder refuses to resubordinate. How should we
proceed?
A: Assuming that all traditional loss mitigation home retention options are not viable in addition to the VA HAMP
program, servicers should pursue alternatives to foreclosure.
36. Q: The loan in default is a Mortgage Revenue Bond. If state law precludes resubordination, how should we
proceed?
A: Servicers should conduct the HAMP review, and if appropriate, contact the assigned Loan Technician for
refunding consideration. The contact information for the assigned Loan Technician can be found in the Loan
Information screen in VALERI. In the event that a servicer is unable to contact the assigned Loan Technician, a
contact list of VA management in each Regional Loan Center (RLC) has been posted to
http://www.homeloans.va.gov/valeri.
asp
.
VA HAMP
Frequently Asked Questions
Last Updated: January 27, 2010
37. Q: How can I implement HAMP if the VA loan is owned by a State Housing Finance Authority that does not
allow modification of the loan due to the law governing the program?
A: Follow the HAMP review procedures in Circular 26-10-2 to see if either the VA Guaranteed Loan NPV Test or
the Conventional Loan NPV Test favor modification. If so, refer to the assigned VA Loan Technician to consider
refunding by VA. If neither favors modification, pursue foreclosure alternatives such as DIL or a compromise
sale, and if unsuccessful, then foreclose.
