source:
  type: guide
  id: va-m26-7-ch03-t11
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 11 — What Does
    a VA Guaranty Mean to the Lender?
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 11 — What
    Does a VA Guaranty Mean to the Lender?.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch03-t11-full
  canonical_id: va-m26-7-ch03-t11-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 11 — What Does
    a VA Guaranty Mean to the Lender?
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 11 — What
      Does a VA Guaranty Mean to the Lender?
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 73e5d344e2743889
    fetched_at: '2026-05-23T01:53:52Z'
    content_hash: sha256:b452379ce6dbdb528896ce1d9ac9ca8a9cf03b5fab6fa9af7766dc2dc17c2bbe
    paragraph_quote: '11. What Does a VA Guaranty Mean to the Lender? Change Date
      November 8, 2012, Change 21 • This section has been updated to make minor grammatical
      edits. a. Protection Against Loss VA guarantees a portion of the loan, identified
      on the VA Loan Guaranty Certificate (LGC) by percentage and dollar amounts.
      If a loss ultimately occurs on the loan, VA will reimburse the loan holder for
      all or part of such loss: • limited by the stated percentage and dollar amount
      of the guaranty, • limited by any VA maximums for reasonable and customary foreclosure
      expenses, and • subject to the lender’s compliance with applicable law and regulations.
      b. Lender Responsibility It is the lender’s responsibility to comply with all
      laws and regulations related to the VA Home Loan program, and thereby prevent
      VA’s denial or reduction of a payment on a future claim. A lender can accomplish
      this by ensuring that its employees who perform work related to VA lending:
      • understand and comply with VA policies, procedures and regulations, and applicable
      law, and • direct questions to VA when issues arise that are not addressed in
      this handbook or other materials provided by VA. c. When is a Loan that was
      Closed Automatically Guaranteed? A loan is automatically guaranteed by VA upon
      closing (prior to issuance of the LGC) provided the loan was made by: • a supervised
      or a nonsupervised lender with automatic authority, and • the lender complied
      with applicable law and regulations. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 3: The VA Loan and Guaranty 3-24 11. What Does a VA Guaranty
      Mean to the Lender?, Continued d. When is a Prior Approval Loan Guaranteed?
      A prior approval loan is also guaranteed by VA upon closing (prior to issuance
      of the LGC) provided: • the closed loan matches the proposed loan upon which
      the Certificate of Commitment was based, and • the lender complied with applicable
      law and regulations. e. What is Evidence of Guaranty? Evidence of guaranty is
      VA Form 26-1899, Loan Guaranty Certificate, which is generated electronically
      via VA’s webLGY application. The LGC represents tangible proof to the lender
      that VA’s guaranty is given in good faith. It is contingent upon: • the veteran,
      property and purpose of the loan being eligible, • no fraud or material misrepresentation
      on the part of the lender, and • the lender’s compliance with applicable law
      and regulations. For example, VA may deny or reduce payment on a future claim
      based on the lender or holder’s noncompliance whether or not VA has issued evidence
      of guaranty on the loan. The LGC also has an audit indicator that, if noted
      Yes, lets the lender know the case has been identified for full review. In these
      instances, the lender then needs to submit a complete loan origination package
      to the appropriate VA office for review. Packages should be submitted within
      15 days of the LGC being generated. f. Total Loss of Guaranty Willful fraud
      or material misrepresentation by the lender or holder, or by an agent of either,
      will relieve VA of liability for payment of any claim on the loan. VA also has
      no liability in the case of: • forgery on the note, mortgage, loan application,
      or other loan documents, or • a Certificate of Eligibility or discharge papers
      that are counterfeited, falsified, or not issued by the Government. A holder
      of a VA loan who acquired the loan without notice or knowledge of fraud or material
      misrepresentation in procuring the guaranty will not be denied payment of any
      claim on the loan by reason of such fraud or material misrepresentation. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 3: The VA Loan and Guaranty 3-25
      11. What Does a VA Guaranty Mean to the Lender?, Continued g. Partial Loss of
      Guaranty A holder of a VA loan who fails to comply with applicable laws and
      regulations may receive only partial payment of a claim if VA’s liability increases
      due to the holder’s noncompliance. Material misrepresentation which is not willful
      has the same consequence. No claim will be paid on such loan until the amount
      of any increase in VA’s liability is known. The burden of proof is on the holder
      to establish that VA’s increased liability is not due to the holder’s noncompliance
      or misrepresentation. Examples of noncompliance with applicable law and regulations
      which may lead to an increase in VA’s liability include: • failure to obtain
      and retain the required lien on property to secure the loan, • failure to include
      the power to substitute trustees, • failure to procure and maintain insurance
      coverage, • failure to advise VA as to default, • failure to provide notice
      of intention to begin foreclosure action, • failure to provide notice to VA
      in any suit or action, or notice of sale, • improper release, conveyance, substitution
      or exchange of security, • lack of legal capacity of a party to the transaction,
      • failure to assure that escrowed/earmarked funds are expended in accordance
      with the agreement, and • failure to take into consideration limitations upon
      the quantum or quality of the estate or property. VA Pamphlet 26-7, Revised
      Chapter 3: The VA Loan and Guaranty 3-26'
  judgment: false
