4.07 LOSS MITIGATION LETTER (02/01/18)

© VA Servicers Handbook - M26-4

a. VA regulations require servicers to attempt contact with the borrower by telephone. The servicer must also send the loss mitigation letter within 45 days of delinquency for Early Payment Defaults (EPDs) and within 75 days of delinquency for non-EPDs. A default is considered an EPD if the borrower becomes delinquent within 6 months following loan origination or the execution of a modification agreement. VA sends an automated loss mitigation letter to borrowers on all loans that reach 120 days delinquent. The loss mitigation letter must:

1. Provide information on how the borrower can contact the servicer.

2. Encourage the borrower to contact the servicer.

3. Explain loss mitigation options available to the borrower.

4. Emphasize that the intent of servicing is to retain home ownership, whenever possible.

b. The letter must also include the following VA-drafted paragraphs:

1. “The delinquency of your mortgage loan is a serious matter that could result in the loss of your home. If you are the Veteran whose entitlement was used to obtain this loan, you can also lose your entitlement to a future VA home loan guaranty. If you are not already working with us to resolve the delinquency, please call us to discuss your workout options. You may be able to make special payment arrangements that will reinstate your loan. You may also qualify for a repayment plan or loan modification.”

2. “VA has guaranteed a portion of your loan and wants to ensure that you receive every reasonable opportunity to bring your loan current and retain your home. VA can also answer any questions you have regarding your entitlement. If you have access to the Internet, and would like to obtain more information, you may access the VA web site at www.va.gov. You may also learn where to speak to a VA Loan Administration representative by calling 877-827-3702.”

c. VA may become involved in the loan’s servicing at other times during the delinquency for reasons such as assistance with appraiser access, requesting forbearance for the servicer/borrower to resolve payment disputes, etc.

d. The servicer may report the Loss Mitigation Letter Sent event when the letter has been mailed to the borrower. This event includes the date the letter was mailed to the borrower.