source:
  type: regulation
  id: va-m26-4-ch05
  authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
  description: 'VA Pamphlet 26-4 Chapter 5 governs loss mitigation on VA-guaranteed loans.

    '
obligations:
- id: va-m26-4-ch05-5-01
  canonical_id: va-m26-4-ch05-5-01
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.01
  description: "LOSS MITIGATION OPTIONS: 5.01 LOSS MITIGATION OPTIONS \na. Loss mitigation is an option available to help Veterans avoid foreclosure on\ndelinquent loans, and reduce possible loss to the government. The Department of \nVeterans Affairs (VA) delegates the primary responsibility for loss mitigation to \nservicers. VA recognizes f…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.01 LOSS MITIGATION OPTIONS \na. Loss mitigation is an option available to help Veterans avoid foreclosure on\ndelinquent loans, and reduce possible loss to the government. The Department of \nVeterans Affairs (VA) delegates the primary responsibility for loss mitigation to \nservicers. VA recognizes five loss mitigation options, and pays an incentive to the \nservicer when any of these options are successfully completed. The loss mitigation \noptions are divided into either home retention options, or alternatives to foreclosure. \nHome retention options include repayment plans, special forbearances, and loan \nmodifications. Alternatives to foreclosure include short sales, and deed-in-lieu (DIL) of \nforeclosure. \nb. VA also has a purchase option that is available for eligible borrowers as an\nalternative to foreclosure. Please refer to Chapter 9, VA Purchase, of this handbook for \nadditional information regarding the purchasing process.\nc. VA technicians may become\
      \ involved in the loss mitigation process when borrowers:\n1. Contact VA directly to request assistance or\n2. When the VA-assigned technician determines that a loss mitigation option should be\npursued after reviewing the Adequacy of Servicing (AOS), or Pre-Foreclosure process on \nthe loan.\nd. When a borrower wants to remain in the home, servicers are to review and offer\nhome retention options as outlined in the VA Home Retention Waterfall. This waterfall \ncan be found in Appendix F of this manual. Home retention options include:\n1. Special Forbearance.\n2. Repayment Plan.\n3. Loan modification.\ne. If the servicer and the borrower cannot resolve the delinquency through a home\nretention option or the borrower no longer wishes to retain the home, the servicer should \nconsider alternatives to foreclosure. Alternatives to foreclosure include: \n1. Short sale.\n2. DIL of foreclosure.\nf. When servicers report a home retention event through their nightly file and the loan\nreinstates,\
      \ the VA Loan Electronic Reporting Interface (VALERI) generates a Default \nCured/Loan Reinstated (DCLR) event. \n\nIf servicers report a home retention event manually through the VALERI Events Bulk \nUpload Templates, they will need to also report the Default Cured/Loan Reinstated event \nafter the home retention event has cured the loan. \nOnce the default is cured through the Default Cured/Loan Reinstated event VA will \nreview for an incentive payment eligibility. When servicers report an alternative to \nforeclosure event, VA reviews the incentive payment eligibility at that time. \ng. When loss mitigation options are not feasible, the servicer should immediately refer\nthe loan to foreclosure in order to reduce potential losses to the Government and to \nensure the Veteran’s indebtedness is not unduly increased. VA encourages servicers to \ncontinue to pursue loss mitigation options even after initiating the foreclosure process. \nh. When a servicer completes a loan modification\
      \ or alternative to foreclosure on a loan\nthat is less than 61 days delinquent, they will need to report the Electronic Default Notice \n(EDN) event by choosing imminent default, property problems, or National Emergency \nDeclaration (NED) as the reason for default. In these instances, the EDN must be \nsubmitted prior to reporting the loan modification or alternative to foreclosure event. VA \ndoes not require the special forbearance or repayment plan events be reported on a loan \nless than 61 days delinquent, unless the loan is impacted by a National Emergency \nDeclaration.\ni. Loans that have been reported with an EDN using the VALERI Events Bulk Upload\nwill not automatically generate the Default Cured Loan Reinstated (DCLR) event. \nServicers must manually report the DCLR event when the loan reinstates.\nj. Information on loss mitigation event reporting can be found in Chapter 2 of this\nhandbook."
    drafter_attestation: Verbatim §5.01 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-02
  canonical_id: va-m26-4-ch05-5-02
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.02
  description: "ACCEPTANCE OF ELECTRONIC SIGNATURES: 5.02 ACCEPTANCE OF ELECTRONIC SIGNATURES\na. VA has no objections to the use of electronic signatures on repayment, forbearance,\nor modification agreements between loan servicers, and borrowers, provided they are \nreadily identifiable during a post-audit review. The Electronic Signatures in Global, a…"
  type: dont
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.02 ACCEPTANCE OF ELECTRONIC SIGNATURES\na. VA has no objections to the use of electronic signatures on repayment, forbearance,\nor modification agreements between loan servicers, and borrowers, provided they are \nreadily identifiable during a post-audit review. The Electronic Signatures in Global, and \nNational Commerce Act (P.L. 106-229) provides that with respect to any transaction in, \nor affecting interstate, or foreign commerce that \"a signature, contract, or other record \nrelating to such transaction may not be denied legal effect, validity, or enforceability \nsolely because it is in electronic form.\" However, VA cautions servicers to ensure \ncompliance with all regulations governing VA-guaranteed home loans, including the \nrequirement to obtain, and maintain a lien of proper dignity (38 C.F.R. §36.4354), which \nwill require compliance with local real estate laws, especially concerning documentation \nof modifications to existing loans, which may vary\
      \ from region to region."
    drafter_attestation: Verbatim §5.02 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-03
  canonical_id: va-m26-4-ch05-5-03
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.03
  description: "SPECIAL FORBEARANCE (38 C.F.R. §36: 5.03 SPECIAL FORBEARANCE (38 C.F.R. §36.4301)\na. A special forbearance is a a documented agreement, by, and between the\nborrower and holder where the holder agrees to suspend or reduce payments for 1 or \nmore months on a loan that is a reportable default (61, or more calendar days delinquent), \nand …"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.03 SPECIAL FORBEARANCE (38 C.F.R. §36.4301)\na. A special forbearance is a a documented agreement, by, and between the\nborrower and holder where the holder agrees to suspend or reduce payments for 1 or \nmore months on a loan that is a reportable default (61, or more calendar days delinquent), \nand the borrower agree to pay the total delinquency at the end of the specified period, or \nenter into a repayment plan. To be eligible for an incetive, the special forbearance must \nbe established for at least 30 days.\n1. No events are needed when a special forbearance is approved on a loan before it\nreaches 61 days delinquent, unless the loan is impacted by a National Emergency \nDeclaration.\nb. During the forbearance period, servicers must monitor the agreement, and take\nappropriate action if the borrower does not comply. Agreements may be renegotiated at \nany time.\nc. Servicers must offer the Special Forbearance when the borrower indicates they can\nrepay the\
      \ missed payments in a lump sum, as outlined on the VA Home Retention \nWaterfall."
    drafter_attestation: Verbatim §5.03 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-04
  canonical_id: va-m26-4-ch05-5-04
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.04
  description: "REPAYMENT PLAN (38 C.F.R. §36: 5.04 REPAYMENT PLAN (38 C.F.R. §36.4301)\na. A repayment plan is a documented agreement, by, and between the borrower and the\nholder to reinstate a loan that is a reportable default (61, or more calendar days \ndelinquent) by requiring the borrower to pay the normal monthly payment, plus a portion \nof…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.04 REPAYMENT PLAN (38 C.F.R. §36.4301)\na. A repayment plan is a documented agreement, by, and between the borrower and the\nholder to reinstate a loan that is a reportable default (61, or more calendar days \ndelinquent) by requiring the borrower to pay the normal monthly payment, plus a portion \nof the delinquency each month. To be eligible for an incentive, the repayment plan must \nbe established for at least a three month period.\n1. No events are needed when a repayment plan is approved on a loan before it reaches\n61 days delinquent, unless the loan is impacted by a National Emergency Declaration.\nb. During the repayment agreement, servicers must monitor the agreement each month,\nand take appropriate action if the borrower does not comply. Plans may be renegotiated at \nany time.\nc. Servicers must discuss and offer, if appropriate, the repayment plan when the\nborrower indicates they can repay the current loan payment plan plus additional amounts \nto bring\
      \ the loan current, as outlined in the VA Home Retention Waterfall."
    drafter_attestation: Verbatim §5.04 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-05
  canonical_id: va-m26-4-ch05-5-05
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.05
  description: "LOAN MODIFICATIONS (38 C.F.R. §36: 5.05 LOAN MODIFICATIONS (38 C.F.R. §36.4315)\na. A loan modification is a documented agreement by, and between the holder and all\nobligors on the loan, which permanently changes one or more of the terms of a loan, and \nmay include re-amortization of the balance due. VA considers the execution date of…"
  type: dont
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.05 LOAN MODIFICATIONS (38 C.F.R. §36.4315)\na. A loan modification is a documented agreement by, and between the holder and all\nobligors on the loan, which permanently changes one or more of the terms of a loan, and \nmay include re-amortization of the balance due. VA considers the execution date of the \nloan modification agreement to be the date of the borrower’s signature. The loan \n\nmodification must be consistent with VA regulatory requirements and sound lending \npractices. If the loan originated prior to January 1, 1990, and includes a transferee, \nservicers must ensure that no previous obligor is released from liability by the completion \nof a loan modification. All loan modifications must meet the following conditions:\n1. The loan is in default.\n2. The loan modification will reinstate the loan, and cure the default.\n3. The current owner(s) is obligated to repay the loan, and is party to the loan\nmodification agreement.\n4. The servicer will not charge\
      \ a processing fee, and all unpaid late fees will be waived.\nAny other actual costs incurred, and legally chargeable, but which cannot be capitalized \nin the modified indebtedness, may be collected directly from the borrower as part of the \nmodification process, or waived, at the discretion of the servicer.\n5. Servicer ensures the first lien position remains intact.\n6. The guaranty dollar amount will not exceed the greater of:\n(a) The original guaranty amount of the loan being modified (if loan modified amount\nis less than the original loan amount, the amount of guaranty will be equal to the original \nguaranty percent applied to the modified loan amount), or\n(b) 25 percent of the loan being modified subject to the statutory maximum specified at\n38 U.S.C. §3703(a)(1)(B).\n7. Borrower does not receive any cash back from the modification.\n8. The property securing the mortgage loan must not have been abandoned or\ncondemned.\n9. Unless an exception is specifically noted in this\
      \ chapter, all requirements outlined in\n38 C.F.R. §36.4315 must be followed. If regulatory requirements for a loan modification \nare not met, and the servicer believes the option would be in the best interest of the \nVeteran, and the Government, the servicer must submit a request for pre-approval \nconsideration in VALERI for VA review. Refer to Chapter 6 of this handbook for more \ninformation on pre-approvals.\n (a). An exception is granted for 38 C.F.R. §36.4315(a)(3) requiring borrower \ncreditworthiness to be evaluated under the criteria specified in 38 C.F.R. §36.4340.\n10. Standard servicer incentives for a completed modification will apply. Refer to\nChapter 7 of this handbook for more information on incentives.\n\nNote: Servicers have discretion to consider other eligibility exclusion criteria including, \nbut not limited to, loans in active bankruptcy, mediation, or litigation, upon advice of \nservicer’s counsel.\n11. Servicers can request Pre-Approval to proceed with\
      \ approval of a loan modification\nthat does not meet the guidelines outlined. VA technicians will review each request and \nconsider the best outcome for the borrower. For more information on the Pre-Approval \nprocess, review Chapter 6 of this manual.\n12. Servicers are to offer the appropriate modification, as outlined on the VA Home\nRetention Waterfall. The modification options include:\nb. TRADITIONAL LOAN MODIFICATION\n1. When the borrower indicates they can afford the current mortgage payments but do\nnot have the funds to reinstate the past due amount, servicers must review for the \nTraditional VA Modification.\nrounded to the nearest one-eighth of one percent (0.125%), as of the date the modification \nmaximum allowable rate at their discretion, without VA preapproval. \n3. The unpaid principal balance of the modified loan will be re-amortized over the\nremaining life of the loan, or if the loan term is to be extended, the maturity date will not \nexceed the shorter of:\n\
      (a) 360 months from the due date of the first installment under the modification, or\n(b) 120 months after the original maotirty date of the loan (unless the original term was\n4. An exception is granted for the following requirements in 38 C.F.R. §36.4340.\nc. 30-YEAR MODIFICATION\n\n1. When the borrower indicates they cannot afford the current mortgage payment and\nthe 30-Year Modification offers a 10% reduction to the principal and interest payment, \nservicers must offer the 30-Year Modification.\nrounded to the nearest one-eighth of one percent (0.125%), as of the date the modification \nmaximum allowable rate at their discretion. \n3. The unpaid balance of the modified loan will be re-amortized over a term of 360\nmonths.\n4. There must be at least a minimum 10% reduction in the monthly principal and\ninterest payment.\n(c) 38 C.F.R. §36.4315(a)(9): The maturity date will not exceed the shorter of:\ni. 360 months from the due date of the first installment under the modification,\
      \ or\nii. 120 months after the original maturity date of the loan (unless the original term was\nd. 40-Year Modification –\n1. When the borrower indicates they cannot afford the current mortgage payment and\nthe 30-Year Modification did not offer a 10% reduction to the principal and interest \npayment, servicers must offer the 40-Year Modification.\nrounded to the nearest one-eighth of one percent (0.125%), as of the date the modification \nagreement is approved, plus 50 basis points, and no more than 1% higher than the \n\nmaximum allowable rate at their discretion, without VA pre-approval. \n3. The unpaid balance of the modified loan will be re-amortized over a term of 480 \nmonths.\n4. If the borrower occupies the property, there must be at least a minimum 10%\nreduction in the monthly principal and interest payment. If a 10% reduction cannot be \nachieved, then the servicer must review for VA Servicing Purchase (VASP). For more \ninformation on VASP, review chapter 9 of this manual.\n\
      (c) 38 C.F.R. §36.4315(a)(9): The maturity date will not exceed the shorter of:\ni. 360 months from the due date of the first installment under the modification, or\nii. 120 months after the original maturity date of the loan (unless the original term was\ne. VA DISASTER MODIFICATION – Allows servicers to offer a permanent\nmodification of loan terms to provide payment relief to impacted delinquent borrowers \nwhen the borrower has not submitted a complete loss mitigation application. All eligible \nimpacted borrowers should have an opportunity to be considered for a VA Disaster Loan \nModification.\n1. Evaluation of Borrower - Servicer evaluation of the borrower’s financial information\nis not required for a disaster modification. To be eligible for the disaster modification \noption, borrowers must successfully complete a 3-month TPP period, and sign the \ndisaster modification agreement in order to receive a permanent loan modification.\nrounded to the nearest one-eighth of one\
      \ percent (0.125%), as of the date the modification \nexisting interest rate on the loan. Servicers may offer an interest rate below the maximum \nallowable rate at their discretion. \n\n3. Servicers are encouraged to continue solicitation throughout the borrower’s\ndelinquency and the foreclosure process, up to 12 months after the federally-declared \ndisaster.\n4. Additional Eligibility Requirements:\n(a) The borrower has been impacted by a federally-declared disaster.\n(b) The mortgage loan was not more than 30 days past due at the time of the disaster.\n(c) The mortgage loan is at least 60 days delinquent after the disaster forbearance\nperiod has ended. Servicers may offer a disaster modification to a borrower prior to the \nexpiration of the forbearance period if clear evidence exists that the borrower is ready to \nresume monthly installments. \n(d) Borrower must successfully complete a TPP. Refer to section 5.07 of this chapter\nfor more information on VA requirements for TPPs.\n\
      (e) The borrower has not submitted a complete loss mitigation application currently\nunder review, and/or is not performing under a default curing loss mitigation option.\n(b) 38 C.F.R. §36.4315(a)(7): A loan has not been modified more than once in a 3-year\nperiod or more than 3 times during the life of the loan. \nf. DISASTER EXTEND MODIFICATION – Allow servicers to offer permanent\npayment relief by extending the maturity date, up to 12 months, to impacted delinquent \nborrowers when the borrower has not submitted a complete loss mitigation application. \nAll eligible impacted borrowers should have an opportunity to be considered for a VA \nDisaster Loan Modification.\n1. Evaluation of Borrower - Servicer evaluation of the borrower’s financial information\nis not required for a disaster modification. To be eligible for the disaster extend \nmodification option, the servicer must waive the delinquent interest accrued on the loan \nas a result of the delinquency. The liability of\
      \ the Secretary will not be increased when \nservicers waive the delinquent interest, allowing for the modification to be completed \nwithout a TPP.\n2. The rate must not exceed the borrower’s current interest rate. The desired result is that\nborrowers can resume the same regular monthly installments without feeling as though\n\nthey have been financially penalized due to a disaster. An exception is granted for 38 \nC.F.R. §36.4315(a)(8) if the current interest rate is above the most recent Freddie Mac\nWeekly Primary Mortgage Market Survey Rate for 30-year fixed-rate conforming\nmortgages.\n3. The servicer may re-amortize the loan, if necessary, to meet any investor restrictions,\nas long as the new monthly payment is the same as, or less than the current monthly \ninstallment.\n4. Servicers are encouraged to continue solicitation throughout the borrower’s\ndelinquency and the foreclosure process, up to 12 months after the federally-declared \ndisaster.\n5. Additional Eligibility\
      \ Requirements:\n(a) The borrower has been impacted by a federally-declared disaster.\n(b) The mortgage loan was not more than 30 days past due at the time of the disaster.\n(c) The mortgage loan is at least 60 days delinquent after the disaster forbearance\nperiod has ended. Servicers may offer a disaster modification to a borrower prior to the \nexpiration of the forbearance period if clear evidence exists that the borrower is ready to \nresume monthly installments. \n(d) The terms of the loan are extended by the equal number of months the loan is\ndelinquent due to the disaster. For example, if the loan is 4-months delinquent, the loan \nterm may only be extended by 4 months. The limit of the term extension is 12 months, \nwithout prior approval from VA. \n(e) The modification does not raise the borrower’s current interest rate or monthly\nprincipal and interest amounts. \n(f) Servicer waives the delinquent interest.\n(g) The borrower has not submitted a complete loss mitigation\
      \ application currently\nunder review, and/or is not performing under a default curing loss mitigation option.\n6. An exception is granted for the following requirements in 38 C.F.R. §36.4315:\n(b) 38 C.F.R. §36.4315(a)(7): A loan has not been modified more than once in a 3-year\nperiod or more than three times during the life of the loan."
    drafter_attestation: Verbatim §5.05 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-06
  canonical_id: va-m26-4-ch05-5-06
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.06
  description: "TRIAL PAYMENT PLAN (TPP) AND INTEREST RATE: 5.06 TRIAL PAYMENT PLAN (TPP) AND INTEREST RATE\na. The TPP allows borrowers to demonstrate their ability to make the modified monthly\nmortgage payment, prior to the completion of a permanent modification. TPPs must be at \nleast three payments in duration.\nb. If a TPP is required, VA encourages the s…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.06 TRIAL PAYMENT PLAN (TPP) AND INTEREST RATE\na. The TPP allows borrowers to demonstrate their ability to make the modified monthly\nmortgage payment, prior to the completion of a permanent modification. TPPs must be at \nleast three payments in duration.\nb. If a TPP is required, VA encourages the servicer to provide the written TPP offer\nwithin 15-calendar days of the date the servicer determines the borrower to be eligible. If \nthe servicer sends the TPP on or before the 15th day of a calendar month, the servicer \nmust use the first day of the following month as the first trial plan payment due date. If \nthe servicer sends the TPP after day 15 of the calendar month, the servicer must use the \nfirst day of the successive month following the next month as the first TPP due date. To \naccept the offer, the borrower can notify the servicer verbally, or make the first TPP. The \nservicer must provide the borrower foreclosure protection, by placing any foreclosure\
      \ \nproceedings on hold, upon receipt of the first trial plan payment. The borrower must \nmake each of the three scheduled trial payments by the last day of the month in which the \npayment is due.\nc. Interest rates are based on the final approval of the loan modification. Servicers may\nrequest pre-approval from VA to complete the modification with an interest rate based on \nthe approval date of the TPP. All pre-approval requests must be submitted prior to the \nTPP agreement, as VA does not grant pre-approvals for actions a servicer has already \ncompleted.\nd. Final Modification - After successfully completing the three trial payments, the\nservicer will provide the borrower with the final modification agreement. The servicer \nshould prepare the agreement early enough in the trial period to allow sufficient \nprocessing time so that the modification becomes effective on the first day of the month \nfollowing the final trial-period month. If the borrower does not make the final\
      \ trial \npayment on or before the due date in the TPP (but does make the final payment before \nthe end of the month in which it is due), then the servicer may complete the loan \nmodification agreement so that the modification becomes effective on the first day of the \nsecond month following the final trial period month. The borrower will not be required to \nmake an additional TPP during the (interim) month in between the final trial-period \nmonth, and the month in which the modification becomes effective. The borrower must \nsign, and return the streamline loan modification agreement, and must agree to set up an \nescrow account for taxes, hazard, and flood insurance prior to the beginning of the TPP if \none does not currently exist."
    drafter_attestation: Verbatim §5.06 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-07
  canonical_id: va-m26-4-ch05-5-07
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.07
  description: "SHORT SALE (38 C.F.R. §36: 5.07 SHORT SALE (38 C.F.R. §36.4322(e))\na. A Short sale is a sale to a third party for an amount less than the borrower’s total\neligible indebtedness (TEI) on the loan. This alternative should be considered when a \nprivate sale is not feasible due to little, or no equity. The servicer must agree to …"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.07 SHORT SALE (38 C.F.R. §36.4322(e))\na. A Short sale is a sale to a third party for an amount less than the borrower’s total\neligible indebtedness (TEI) on the loan. This alternative should be considered when a \nprivate sale is not feasible due to little, or no equity. The servicer must agree to release \nthe lien in exchange for the proceeds of the sale. The servicer may complete a Short sale \nif the following conditions exist:\n\n1. The servicer has determined the loan insoluble. Note: Servicer evaluation of the\nborrower’s financial information is not required if the loan is 60 or more days delinquent, \nand the borrower has requested a Short sale. In those instances, exceptions are granted for \n38 C.F.R. §36.4350(h)(2), and (3), eliminating a servicer’s requirement to establish \nemployment status, present income of the borrower(s), as well as current monthly \nexpenses of the borrower(s) including household, and debt obligations. \n2. The net proceeds equal\
      \ or exceed the net value of the property securing the loan.\n3. The current owner of the property will not receive any proceeds from the sale of the\nproperty.\nb. Any liquidation appraisal for a property originally scheduled for foreclosure will not\nrequire a second appraisal if a subsequent Short sale offer is made on the property. The \nexterior-only liquidation appraisal will be sufficient to complete the Short sale without \nany further delays.\nc. If regulatory requirements for a Short sale are not met, and the servicer believes the\noption would be in the best interest of the Veteran, and the government, the servicer must \nsubmit a request for pre-approval in VALERI. Refer to Chapter 6 of this handbook for \nmore information on pre-approvals."
    drafter_attestation: Verbatim §5.07 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-08
  canonical_id: va-m26-4-ch05-5-08
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.08
  description: "DIL OF FORECLOSURE (38 C.F.R. §36: 5.08 DIL OF FORECLOSURE (38 C.F.R. §36.4322(f)) \na. A DIL of foreclosure is a voluntary transfer of a property from the borrower to the\nservicer for a release of all obligations under the mortgage. \nb. In cases when a default is insoluble, and there is little, or no likelihood of a private\nsale, con…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.08 DIL OF FORECLOSURE (38 C.F.R. §36.4322(f)) \na. A DIL of foreclosure is a voluntary transfer of a property from the borrower to the\nservicer for a release of all obligations under the mortgage. \nb. In cases when a default is insoluble, and there is little, or no likelihood of a private\nsale, consideration should be given to accept a DIL of foreclosure. Completing a DIL \nmay save on foreclosure costs, cut down on possible decreases in the value of the \nsecurity, and reduce, or eliminate the amount of the Veteran's indebtedness. A DIL is \ncompleted when the deed to the servicer from the Veteran is sent for recording, or is \nrecorded. The property is considered conveyed to VA when the servicer reports the \nTransfer of Custody (TOC) event in VALERI. Servicers must submit the full title \npackage to VA’s property management contractor. [Refer to the Title Documentation, \nInsurance, and Timeframe Requirements on the VALERI Internet for additional \ninformation.]\
      \ Servicers may complete a DIL if all the following conditions exist:\n1. The loan is insoluble. Note: Servicer evaluation of the borrower’s financial\ninformation is not required if the loan is 60 or more days delinquent, and the borrower \nhas requested a DIL. In those instances, exceptions are granted for 38 C.F.R. \n§36.4350(h)(2), and (3), eliminating a servicer’s requirement to establish employment\nstatus, present income of the borrower(s), as well as current monthly expenses of the\nborrower(s) including household, and debt obligations.\n\n2. The VA net value of the property has been determined by subtracting the estimated\ncosts to VA for the acquisition, and disposition of the property from the “as is” value \navailable on the Notice of Value (NOV).\n3. A clear title can be obtained.\n4. An agreement, signed by the borrower, to vacate the property when the deed is\nrecorded, or to give possession of the property to VA immediately upon notification to do \nso."
    drafter_attestation: Verbatim §5.08 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-09
  canonical_id: va-m26-4-ch05-5-09
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.09
  description: "RELOCATION ASSISTANCE FOR VA BORROWERS: 5.09 RELOCATION ASSISTANCE FOR VA BORROWERS\na. VA authorizes servicers to advance $1,500 in relocation assistance to borrower\noccupants who complete a short sale with a VA short sale claim, or who execute a DIL. \nVA will treat this as a reimbursable expense that may be included as a part of the elig…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.09 RELOCATION ASSISTANCE FOR VA BORROWERS\na. VA authorizes servicers to advance $1,500 in relocation assistance to borrower\noccupants who complete a short sale with a VA short sale claim, or who execute a DIL. \nVA will treat this as a reimbursable expense that may be included as a part of the eligible \nindebtedness on the basic claim event in VALERI. More information on requesting \nreimbursement for the relocation expense can be found in Chapter 14 of this manual.\nb. VA expects servicers to proactively notify eligible borrowers of the availability of\nforeclosure alternatives, and to encourage completion of a short sale, or DIL by providing \nthe homeowner a written agreement describing the requirements for receipt of a \nrelocation incentive. In the case of a DIL, the agreement must specify that the property \nwill be unencumbered by other liens, or restrictions on title, it will be kept in good, and \nsafe condition, and it will be left ready for sale in “broom\
      \ clean” condition (i.e., clear of \nall personal belongings, and reasonably clean) upon the homeowner’s departure.\nc. Relocation assistance can provide necessary funds to conduct a move, or pay for\nlodging for borrowers who are faced with the loss of their home. For servicers, the \ntransfer of ownership via DIL, or short sale is typically shorter than a foreclosure time \nperiod, and the property is left in better condition via DIL, which preserves the condition, \nand value of the property by minimizing the time it is vacant, and subject to vandalism, \nand deterioration. In addition, alternatives to foreclosure options generally provide a \nsubstantially improved outcome over a foreclosure sale for borrowers, investors, and \ncommunities."
    drafter_attestation: Verbatim §5.09 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
- id: va-m26-4-ch05-5-10
  canonical_id: va-m26-4-ch05-5-10
  section: VA Servicer Handbook M26-4 Chapter 5 § 5.10
  description: "LOAN MODIFICATION OVERSIGHT: 5.10 LOAN MODIFICATION OVERSIGHT\na. VA performs several reviews during the life of the loan. Reviews are performed to\nensure that VA’s liability was not increased due to non-compliance with VA regulatory \nrequirements. The reviews may include suspicious loan modification, and early payment \ndefault …"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - va
  - m26
  - '4'
  - ch05
  primary_source:
    tier: 1
    authority: VA Servicer Handbook M26-4 Chapter 5 — Loss Mitigation
    source_class: va-handbook-m26-4
    source_url: https://benefits.va.gov/WARMS/M26_4.asp
    snapshot_id: 2f7ddad872ea50b3
    fetched_at: '2026-05-23T01:50:00Z'
    content_hash: sha256:609536e8365c71a57c632f219b16799ce1b65cca131de510f2b51349ca9109d9
    paragraph_quote: "5.10 LOAN MODIFICATION OVERSIGHT\na. VA performs several reviews during the life of the loan. Reviews are performed to\nensure that VA’s liability was not increased due to non-compliance with VA regulatory \nrequirements. The reviews may include suspicious loan modification, and early payment \ndefault (EPD) on a modified loan.\nb. Suspicious Loan Modification (38 C.F.R. §36.4315). VA performs a review of a loan\nmodification if the servicer failed to report all necessary data elements in the Loan \nModification Complete event, and/or VALERI determines the data has failed regulatory \nrequirements. When this occurs, VALERI will open a Review Suspicious Loan \n\nModification process for review by the VA-assigned technician. All broken business \nrules in the Loan Modification Complete event must be reviewed to determine the \nvalidity of regulatory infractions. VA will review the loan modification to ensure the \nservicer followed the requirements of the modification\
      \ option used. Violations of these \ninfractions could result in VA requesting a revision to the loan modification, or possible \nclaim adjustments. Corrections may be required by the servicer if the terms negatively \nimpact the Veteran, or the Government. Servicers must complete all corrections within 60 \ndays of notification by VA. Failure to make corrections within the required timeframe \ncould result in VA making an adjustment to the claim if the loan becomes delinquent, and \nsubsequently terminates. The following are some errors that may require further VA \nreview:\n1. The loan modification did not cure the default.\n2. The interest rate on the modified loan exceeds the maximum allowable rate.\n3. The term of the modified loan exceeds the maximum allowable term.\n4. The new loan does not amortize to within $50 of zero over the new term.\nc. EPD on a Modified Loan. VA reviews EPDs any time a servicer reports an EDN, and\nthe loan became delinquent within the first 6 months\
      \ of the first payment due date on the \nloan modification agreement. When this occurs, VALERI will open a Review Early \nPayment Default process for review by the VA-assigned technician. An EPD may be the \nresult of an improper decision by the servicer to modify the loan. VA will complete an \nanalysis of the loan modification underwriting package, if applicable, to ensure it \ncomplies with VA requirements. Servicer errors may result in a regulatory infraction \nbeing added, and a possible future claim adjustment."
    drafter_attestation: Verbatim §5.10 from snapshot 2f7ddad872ea50b3 via deletion-only reading projection (repeated headers/footers + page numbers stripped, line-wrap hyphens joined); substring-verified against the projection.
  judgment: false
