5.10 DIL OF FORECLOSURE (38 C.F.R. 36.4322(F)) (02/01/18)

© VA Servicers Handbook - M26-4

a. A DIL of foreclosure is a voluntary transfer of a property from the borrower to the servicer for a release of all obligations under the mortgage.

b. In cases when a default is insoluble, and there is little, or no likelihood of a private sale, consideration should be given to accept a DIL of foreclosure. Completing a DIL may save on foreclosure costs, cut down on possible decreases in the value of the security, and reduce, or eliminate the amount of the Veteran's indebtedness. A DIL is completed when the deed to the servicer from the Veteran is sent for recording, or is recorded. The property is considered conveyed to VA when the servicer reports the Transfer of Custody (TOC) event in VALERI. Servicers must submit the full title package to VA’s property management contractor. [Refer to the Title Documentation, Insurance, and Timeframe Requirements on the VALERI Internet for additional information.] Servicers may complete a DIL if all of the following conditions exist:

1. The loan is 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 DIL. 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 VA net value of the property has been determined by subtracting the estimated costs to VA for the acquisition, and disposition of the property from the “as is” value available on the Notice of Value (NOV).
3. A clear title can be obtained.
4. An agreement, signed by the borrower, to vacate the property when the deed is recorded, or to give possession of the property to VA immediately upon notification to do so.