VA issued Circular 26-24-16 clarifying the implementation date for the recently released guidance regarding the Home Retention Waterfall and other loss mitigation options outlined in Chapter 5 and Appendix F of the Servicer Handbook (Handbook). On April 10, 2024, VA added Appendix F to the Handbook setting forth instructions for the Home Retention Waterfall (Waterfall). On May 8, 2024, VA revised Chapter 5 (Loss Mitigation) of the Handbook. Neither update directly referenced the required implementation dates for the Waterfall. As a result, servicers used Chapter 5 independent of Appendix F, which resulted in proposed traditional modifications with a significant increase in monthly payment (without confirming affordability with the borrower). Per this Circular, effective May 8, 2024, servicers may use the loss mitigation options outlined in revised Chapter 5 of the Handbook in conjunction with the Waterfall outlined in Appendix F.
Servicers must follow the Waterfall in the order outlined when reviewing borrowers for loss mitigation options. If the servicer arrives at a step in the Waterfall the servicer has not yet implemented, the servicer should follow the moratorium guidance outlined in Circular 26-24-12 (Loan Repayment Relief for Borrowers), until the servicer is able to proceed to the next step in the Waterfall. For borrowers affected by COVID-19, servicers may use the COVID-19 home retention options, as described in paragraph 6 of Circular 26-24-12, until the servicer has implemented the Veterans Affairs Servicing Purchase (VASP) program (required by October 1, 2024). On and after October 1, 2024, servicers must follow the Waterfall outlined in Appendix F. Effective immediately, servicers must discontinue offering the loss mitigation options outlined in previous versions of Chapter 5 of the Handbook, including the VA Affordable Modification (VAAM) and Streamline modification. However, servicers may still honor those loss mitigation options offered or approved prior to the date of this Circular. The Circular went into effect August 8, 2024.
Click to view the VA Circular 26-24-16: https://www.tenaco.com/wp-content/uploads/2024/08/VA-Circular-26-24-16-08-08-24.pdf
