5.09 COMPROMISE SALE (38 C.F.R. 36.4322(E)) (02/01/18)
- Kacey Olson
Owned by Kacey Olson
Nov 24, 2018
2 min read
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© VA Servicers Handbook - M26-4
a. A compromise sale is a sale to a third party for an amount less than the borrower's total eligible indebtedness (TEI) on the loan. This alternative should be considered when a private sale is not feasible due to little or no equity. The servicer must agree to release the lien in exchange for the proceeds of the sale. The servicer may complete a compromise sale if the following conditions exist:
1. The servicer has determined the loan insoluble. Note: Servicer evaluation of the borrower’s financial information is not required if the loan is 60, or more days delinquent, and the borrower has requested a compromise sale. In those instances, exceptions are granted for 38 C.F.R. 36.4350(h)(2), and (3), eliminating a servicer’s requirement to establish employment status, present income of the borrower(s), as well as current monthly expenses of the borrower(s) including household, and debt obligations.
2. The net proceeds equal, or exceed the net value of the property securing the loan.
3. The current owner of the property will not receive any proceeds from the sale of the property.
b. When a servicer completes a compromise sale option on a loan that is less than 61 days delinquent, they will need to report the EDN event by choosing “imminent default”, or if appropriate, “property problems,” as the reason for default. The EDN must be submitted prior to completing the closing for the compromise sale, or reporting the Compromise Sale Complete event in VALERI.
c. Any liquidation appraisal for a property originally scheduled for foreclosure will not require a second appraisal if a subsequent compromise sale offer is made on the property. The exterior-only liquidation appraisal will be sufficient to complete the compromise sale without any further delays.
d. If regulatory requirements for a compromise sale are not met, and the servicer believes the option would be in the best interest of the Veteran, and the Government, the servicer must submit a request for pre-approval in VALERI. Refer to Chapter 6 of this handbook for more information on pre-approvals.
2. The net proceeds equal, or exceed the net value of the property securing the loan.
3. The current owner of the property will not receive any proceeds from the sale of the property.
b. When a servicer completes a compromise sale option on a loan that is less than 61 days delinquent, they will need to report the EDN event by choosing “imminent default”, or if appropriate, “property problems,” as the reason for default. The EDN must be submitted prior to completing the closing for the compromise sale, or reporting the Compromise Sale Complete event in VALERI.
c. Any liquidation appraisal for a property originally scheduled for foreclosure will not require a second appraisal if a subsequent compromise sale offer is made on the property. The exterior-only liquidation appraisal will be sufficient to complete the compromise sale without any further delays.
d. If regulatory requirements for a compromise sale are not met, and the servicer believes the option would be in the best interest of the Veteran, and the Government, the servicer must submit a request for pre-approval in VALERI. Refer to Chapter 6 of this handbook for more information on pre-approvals.