M26-3 January 7, 1992

Change 7

[CONTENTS]{.underline}

[CHAPTER 3. INTERNAL PROCEDURES\--LOAN MANAGEMENT]{.underline}

[PARAGRAPH]{.underline} [PAGE]{.underline}

[Section I. VA Portfolio Loans]{.underline}

3.01 Processing VA Portfolio Loans 3-1

3.02 Loan Management Numbers 3-2

3.03 Loan Management Folders 3-4

3.04 PLS (Portfolio Loan System) Disposition Instructions 3-5

3.05 Documents in Safekeeping 3-6

[Section II. Guaranteed and 38 CFR 36.4600 Loans\--]{.underline}

[Liquidation and Claims System]{.underline}

3.06 General 3-8

3.07 Filing Loan Folders 3-19

[Section III. Vouchering Procedure]{.underline}

3.08 General 3-19

3.09 Taxes and Assessments 3-20

3.10 Other Expenses or Advances by VA 3-21

3.11 Accounting Classifications 3-22

3.12 Foreclosure and Other Liquidation Expense 3-22

[Section IV. Loan Management Forms and Form Letters]{.underline}

3.13 VA Form 26-1877, Loan Guaranty Receipt 3-23

3.14 VA Form 26-6379, Progress Sheet on Application for

Release from Liability or Substitution of Entitlement

(Under Sections 1817 and 1820(a)(4) or 1802(b)(3),

Title 38, U.S.C.) 3-23

3.15 VA Form 26-6380, Register of Applications for Release

From Liability Under Sections 1817(a) and 1820(a)(4)

and Substitution of Entitlement 3-24

3.16 VA Form 26-6380a, Register - Release from Liability

Under Section 1817(b) 3-24

3.17 VA Form 26-6381, Application for Assumption Approval

and/or Release From Personal Liability to the

Government on a Home Loan 3-24

3.18 VA Form 26-6382, Statement of Purchaser or Owner

Assuming Seller\'s Loan 3-24

3.19 VA Form 26-6393, Loan Analysis 3-25

3.20 VA Form 26-6713, Summary of Basis for Liquidation

Procedure 3-25

3.21 VA Form 26-6714, Sales Closing Statement 3-25

3.22 VA Form 26-6715, Record of Telephone Conversation 3-26

3.23 VA Form 26-6724, Invitation, Bid, and/or

Acceptance or Authorization 3-26

3.24 VA Form 26-6801, Custodial Report 3-27

January 7, 1992

M26-3

Change 7

[CONTENTS]{.underline}

[CHAPTER 3. INTERNAL PROCEDURES\--LOAN
MANAGEMENT\--Continued]{.underline}

[PARAGRAPH]{.underline} [PAGE]{.underline}

[Section IV. Loan Management Forms and Form
Letters\--Continued]{.underline}

3.25 VA Form 26-6807, Financial Statement 3-28

3.26 VA Form 26-6807a, supplemental Certification for Financial
Statement 3-28

3.27 VA Form 26-6808, Loan Service Report 3-28

3.28 VA Form 26-6816, Loan Management Register 3-29

3.29 VA Form 26-6820, Advice of Changes in Terms or

Status of Portfolio Loan 3-29

3.30 VA Form 26-6822, Advice of Termination and

Indebtedness on Portfolio Loans 3-31

3.31 VA Form 26-6850, Notice of Default 3-33

3.32 VA Form 26-6850a, Notice of Default and Intention to Foreclose 3-34

3.33 VA Form 26-6851, Notice of Intention to Foreclose 3-34

3.34 VA Form 26-8753, Supplemental Servicing Code Sheet (LCS-VADATS)
3-34

3.35 VA Form 26-8778, Request to Lender for Status of

Loan Account - LCS 3-34

3.36 VA Form 26-8799, \[Acknowledgment\] 3-34

\[ \]

3.38 VA Form 26-8802, Followup on Foreclosure Sale - LCS 3-35

3.39 VA Form 26-8839, Loan Guaranty\--IRS Locator Code Sheet 3-35

3.40 VA Form 26-8844, Financial Counseling Statement 3-38

3.41 VA Form 26-8875, Delinquency Notice - Initial Default. 3-38

3.42 VA Form 26-8876, Delinquency Notice - Serious Default 3-38

3.43 VA Form 26-8880, Some Points to Remember on Hazard

Insurance, Taxes and Assessments on Your Property 3-38

3.44 VA Form 26-8893, Instructions for Purchaser Assuming

· GI Loan or Substituting GI Loan Entitlement 3-39

3.45 VA Form 26-8901, Recommendation to Terminate

Portfolio Loan 3-39

3.46 VA Form 26-8922, Refunding/Equity Review Worksheet 3-39

3.47 VA Form 26-8985, Delinquency Notice Continued Default 3-40

3.48 VA Form 26-8985a, Delinquency Notice Continued Default -
English/Spanish 3-40

3.49 Form Letters 3-40

3-ii

M26-3

September 26, 1988

[CHAPTER 3. INTERNAL PROCEDURES\--LOAN MANAGEMENT]{.underline}

[SECTION I. VA PORTFOLIO LOANS]{.underline}

[3.01 PROCESSING VA PORTFOLIO LOAN RECORDS]{.underline}

The several steps to be taken in establishing and maintaining VA
portfolio loan records are set forth below with appropriate references
to forms and procedure described elsewhere.

a\. [Direct Loans.]{.underline} Actual closings are accomplished under
the direction of authorized personnel of the Loan Guaranty Division.
When the review contemplated in M26-6, paragraph 2.42, has been made,
the complete direct loan folder, including the loan closer\'s final
report, all legal instruments, insurance policies, appraisal report,
credit information including VA Form 26-6393, Loan Analysis, and other
pertinent papers, will be forwarded to the Loan Service and Claims
Section, who will then proceed as follows:

\(1\) Complete VA Form 26-6801, Custodial Record, in duplicate; obtain
signature of custodial clerk on original upon delivery to him or her of
instruments. Place original VA Form 26-6801 in the loan guaranty folder
(par. 3.O5); the duplicate will be retained by the custodial clerk (par.
3.24) and will be disposed of in accordance with RCS VB-1, part I, item
No. 12-111.200.

\(2\) Prepare FL 26-185a and VA Form 26-8880, Some Points to Remember on
Hazard Insurance, Taxes and Assessment on Your Property, with a copy of
FL 26-185a for the file, and forward them to the borrower unless he or
she was given these items at loan closing (pars. 3.43 and 3.49, and
M26-6, pars. 4.08 and 4.22a).

\(3\) Mail FL 26-560 to the insurance agent in appropriate cases.

\(4\) Forward complete folder for filing.

b\. [Vendee Accounts]{.underline}. When the loan is closed, the Property
Management Section will submit VA Form 26-6714, Sales Closing Statement,
in duplicate, together with all legal documents and related papers,
including complete credit information, VA Form 26-6705, Offer to
Purchase and Contract of Sale, VA Form 26-6393 and the latest appraisal
report. The Loan Service and Claims Section will then proceed as
follows:

\(1\) Examine all loan documents including insurance policies and
related papers (pars. 2.01b(1) and 2.07d).

\(2\) Enter the case on VA Form 26-6816, Loan Management Register,
checked for vendee accounts, and assign the number to all related
documents and papers. The copy of VA Form 26-6714, as so completed, will
be forwarded promptly to the Finance activity. However, these actions
will have been completed previously if the loan management register is
maintained by the Property Management Section (par. 3.02c).

3-1

M26-3 September 26, 1988

\(3\) Prepare loan management folder (par. 3.03b).

\(4\) Complete VA Form 26-6801 in duplicate; obtain signature of
custodial clerk on original upon delivery to him or her of instruments.
Place original custodial record in the loan guaranty folder (par. 3.05);
the duplicate will be retained by the custodial clerk (par. 3.24) and
will be disposed of in accordance with RCS VB-1, part I, item No.
12-111.200.

\(5\) Prepare FL 26-185a and VA Form 26-8880, with a copy of FL 26-185a
for the file, and forward them to the borrower unless he or she was
given these items at loan closing (pars. 3.43 and 3.49, and M26-5,
chapter 3).

\(6\) Mail FL 26-560 to insurance agent in appropriate cases.

\(7\) Forward complete folder for filing.

c\. [Acquired Loans]{.underline}. Loans acquired by VA are maintained
under two categories as described in paragraph 2.01c. When the loan has
been acquired under 38 CFR 36.4318 (par. 2.38j) proceed as follows:

\(1\) See that appropriate loan instruments are properly recorded and
that all documents and related papers, including insurance policies, are
examined as in the case of a vendee account (pars. 2.01b(1) and 2.08d).

\(2\) Add the proper prefix (par. 3.02d) to loan number for
identification of case as an acquired loan.

\(3\) Enter the case on VA Form 26-6816 checked for acquired loans (par.
3.28).

\(4\) Complete VA Form 26-6801 in duplicate; obtain signature of
custodial clerk on original copy upon delivery to him or her of
instruments. Place original VA Form 26-6801 in the loan guaranty folder
(par. 3.05); the duplicate will be retained by the custodial clerk (par.
3.24) and will be disposed of in accordance with RCS VB-1, part I, item
No. 12-111.200.

\(5\) Notify borrower by letter of transfer to VA, giving specific
advice concerning future installment payments as may be appropriate to
the circumstances of each case and forward VA Form 26-8880, unless the
borrower was furnished with this item at the time the loan was acquired
(par. 3.43).

\(6\) Mail FL 26-560 to the insurance agent in appropriate cases.

\(7\) Forward complete folder for filing.

3-2

M26-3

September 26, 1988

[3.02 LOAN MANAGEMENT NUMBERS]{.underline}

a\. [Complete Loan Number]{.underline}. Loan numbers assigned to direct
loans, vendee accounts, and acquired loans will include certain
identifying prefixes as stated in subparagraphs b, c and d below. The
complete loan number or account designation will comprise (a) the
appropriate prefix, (b) the loan number, (c) identification of regional
and State, if different. Examples:

DL 256 AL Direct loan.

SH 3 MN ND Home vendee account.

b\. [Direct Loan Numbers]{.underline}. No change will be made in the
numbers assigned to direct loans and no separate register will be
main­tained since they already will have been listed on VA Form 26-1894,
Application Register.

c\. [Vendee Accounts Numbers]{.underline}. NOTE: If desired for the
assignment of loan numbers prior to closing, this loan management
register may be maintained by the Property Management Section. The
number assigned to a loan which is not consummated will be canceled by
an appropriate entry in the register. Vendee account numbers will be
recorded on VA Form 26-6816 appropriately checked for vendee accounts
(see par. 3.28), regardless of the type of security, in one ascending
numerical sequence, with an appropriate prefix for iden­tification, as
follows:

\(1\) [Guaranteed Loan Program]{.underline}. The prefix \"SH\" will
denote that the security for the vendee account is a home if the
property was acquired by VA under the guaranteed loan program. This
category ,will also include junior liens taken by VA as purchase money
mortgages in those cases in which the property is sold by VA subject to
an existing primary mortgage not held by VA.

\(2\) [Direct Loan Program]{.underline}. The prefix \"DV\" will be used
for a direct loan vendee account to denote that the property was
formerly the security for a direct loan which had been held continuously
by VA until its termination. All direct loans in the VA portfolio will
be considered as home loans, as will the vendee accounts which result
from that program.

d\. [Acquired Loan Numbers]{.underline}. Acquired loan numbers will be
recorded on a VA Form 26‑6816, appropriately checked for acquired loans
(see par. 3.28), regardless of the type of security. The prefix \"SAH\"
will be used to denote that the security for the acquired loan is a
home. A digit will be included in the prefix when appropriate, to
identify the acquired loan account as one of two categories, as follows:

\(1\) [SAH]{.underline}. A loan made under 38 U.S.C. 1810 or 1815, which
was refunded under 38 CFR 36.4318 to avoid liquidation. (See par. 2.38).

\(2\) [SA4H]{.underline}. Other loans acquired by VA.

3-3

M26-3 September 26, 1988

[3.03 LOAN MANAGEMENT FOLDERS]{.underline}

VA portfolio loan folders may be withdrawn from the file by the Loan
Service and Claims Section as the need arises. The folders will contain
all pertinent correspondence and other papers except those for which
separate filing and maintenance is provided. (See par. 3.05.)

a\. [Direct Loan Folders]{.underline}. The original direct loan folder
becomes the loan management folder in which will be fastened in
chronological order, all correspondence and other pertinent papers. The
complete loan folder will be forwarded for filing when loan management
records have been established pursuant to paragraph 3.01a.

b\. [Vendee Account Folders]{.underline}. Upon receipt from the Property
Management Section of the VA Form 26-6714 (par. 3.21), together with the
loan instruments and related papers, a loan management folder will be
established for each vendee account. The tab on each such folder will
show the name(s) of the obligor(s) and the full loan management number.
(See par. 3.02.) The complete folder will be forwarded for filing after
the necessary loan management records have been established and the loan
papers processed according to paragraph 3.01b. Papers shall be securely
fastened in the folder, and the following arrangement is suggested:

Left: Latest Available Appraisal Report

Credit information including VA Form 26-6393; VA Form 26-6801 (par.
3.24)

VA Form 26-6714 (par. 3.21)

Receipts for paid taxes and insurance premiums until otherwise disposed
of

(see pars. 2.07 and 2.08h)

Right: Correspondence and other papers in chronological order.

c\. [Acquired Loan Folders]{.underline}. In the event two or more loans
are acquired on the same property, the folder for each such loan will be
appropriately cross referenced. The tab on each folder will show the
name(s) of obligor(s) and the full loan management number. (See par. 3.
02d. ) The complete folder will be forwarded for filing with papers
securely fastened and the following arrangement is suggested:

Left: Latest Available Appraisal Report and Certificate of Reasonable
Value

Credit information, including VA Form 26-6393, if any

VA Form 26-6808, Loan Service Report (par. 3.27), or

VA Form 26-6807, Financial Statement (par. 3.25)

VA Form 26-6807a, Supplemental Certification for Financial Statement
(par. 3.26)

Holder\'s statement of account

VA analysis of account

VA Form 26-6801 (par. 3.24)

Receipts for paid taxes and insurance premiums until otherwise disposed
of

(see pars. 2.07 and 2.08h)

Right: Correspondence and other papers in chronological order.

3-4

M26-3

September 26, 1988

d\. [Loans Which Are Assumed]{.underline}. Should title to the property
be transferred to a new owner, or The mailing address of the present
owner change, appropriate revisions will be made in all related records.

[3.04 PLS (PORTFOLIO LOAN SYSTEM) DISPOSITION INSTRUCTIONS]{.underline}

Loan Guaranty index and disposal cards are produced by PLS to assist in
the pulling of folders such as rejected or withdrawn direct loan
applications and paid-in-full vendee accounts which are eligible for
destruction at the regional office. Since the availability of space for
records storage is limited, these cards should be fully utilized.

a\. [PLS Index Cards]{.underline}. Punched cards are produced daily by
PLS for each new direct loan applicant, each obligor on new vendee
accounts and acquired loans, and each new owner of all portfolio loans.
The cards are identified on the first print line, right-hand side, by
the words \"INDEX CARD,\" and will be interfiled alphabetically in the
Loan Guaranty Index in accordance with M23-1, part I, paragraph 13.35.

b\. [PLS Index Correction Cards]{.underline}. Corrected index cards are
produced daily by PLS for all corrections, change-of-name data, or
social security number, and are identified by the word \"CORRECTION\"
printed beneath the words \"INDEX CARD.\" The correction cards will
replace related existing cards filed in the Loan Guaranty Index. The
existing cards will be removed from the index and disposed of in
accordance with RCS (Records Control Schedule) VB-1, part I, item No.
12-062.000.

c\. [PLS Disposal Cards - Direct Loan Applications Withdrawn by Veteran
or Rejected by VA]{.underline}

\(1\) Regional offices will receive disposal cards for use in
identifying direct loan folders eligible for destruction under RCS VB-1,
part I, item No. 12-080.100, and for pulling and destroying related
index cards (item No. 12-062.410). The disposal cards are prominently
labeled as \"DISPOSAL CARD - REJECTED - WITHDRAWN DIRECT LOAN\" on the
right side of the card. Disposal cards are produced quarterly as of the
end of the months of February,-May, August, and November, and will reach
regional offices on or about the 15th of the following month. Cards are
produced for those cases rejected and withdrawn 26, 27, and 28 months
previously. The month and year of the disposition action are shown on
the card, in addition to the date the cards were produced.

\(2\) Disposal cards will be destroyed upon destruction of related loan
folders and index cards, in accordance with RCS VB-1, part 1, item No.
12-063.200.

3-5

M26-3 September 26, 1988

d\. [PLS Disposal Cards - Paid-in-Full Vendee Accounts]{.underline}

\(1\) Regional offices will receive disposal cards for use in
identifying paid-in-full vendee account folders and folders on accounts
sold to investors reported paid in full by holders (RCS VB-1, part I,
item Nos. 12-110.310 and 12-110.330, respectively). On or about June 30
of each year, disposal cards are produced for all vendee accounts paid
in full during the fourth calendar year prior to January 1 of the
current year. Two separate decks of cards are produced. These cards can
be identified by the words \"38 CFR 36.4600 REPTD PAID IN FULL\" or
\"PAID-IN-FULL VENDEE ACCOUNT,\" as applicable.

\(2\) Each deck will be in loan identification sequence (office of
jurisdiction, office of origin, type of loan, and loan number). Special
sorts, such as terminal digits, may be requested by letter to Central
Office (265C).

\(3\) Related index cards for paid-in-full accounts will be retained in
the Loan Guaranty Index. Following completion of the pulling and
destroying of related folders, disposal cards will be destroyed in
accordance with RCS VB-1, part I, item No. 12-063.300.

[3.05 DOCUMENTS IN SAFEKEEPING]{.underline}

When the loan papers have been examined and the loan processed pursuant
to paragraph 3.01, all legal documents will be removed from the file and
separately maintained, secure against unauthorized removal and
destruction by fire. (See subpars. a and b below. ) This will include
such instruments as the note, bond, mortgage, deed of trust, installment
contract, original or copy of releases, extension or modification
agreements, assumption agreements, abstract (except as indicated in
subpars. a and b below) or title certificate, and other papers of a
legal nature. In this connection, VA Form 26-6801 (par. 3.24) will be
completed in duplicate and delivered together with the instruments to
the employee designated as custodial clerk. The custodial clerk will
retain the duplicate and sign the original as a receipt to be filed in
the loan folder.

a\. [Filing Documents]{.underline}. Filing will be by loan number in
four categories\--direct loans, vendee accounts, acquired loans, and
veterans liability accounts (see M26-4, pars. 3.13d, 3.14b and c). The
loan number and borrower\'s name will be typed on the outside of each
envelope or file to facilitate filing and ready reference. It is
important that the documents for each loan be physically separated and
properly identified so as not to be commingled with those of other
loans. However, holes will not be punched in legal documents for filing
purposes with the possible exception of the pages in abstracts of title.

3-6

September 20, 1993 M26-3

Change 16

b\. [Filing Equipment]{.underline}. The filing equipment to be used in
storing documents in safekeeping will depend on whether or not the
building in which the documents will be maintained is fire-resistant.
The .following is a guideline of equipment that will be used by each
.regional office to secure legal documents against unauthorized removal
or destruction by fire:

\(1\) In buildings which are not fire-resistant all documents described
above will be filed in a fireproof safe, either folded into heavy manila
envelopes of suitable size (4-1/8 by 9-1/2 inches, open end suggested)
or filed flat if the title abstracts are too voluminous for folding.

\(2\) In fire-resistant buildings, all instruments evidencing and
securing the indebtedness on portfolio loans and liability accounts;
i.e., note, bond, mortgage, deed, of trust, installment contract,
releases, extension or modification agreements, assumption agreements,
etc., may be filed in either a fireproof safe or in fire-resistant
locked file cabinets. In lieu of using fireproof safe or fire-resistant
locked file cabinets, these instruments may be maintained in a separate
locked security room and filed on open metal shelving. Title abstracts,
title certificates and other papers which require safekeeping, but do
not evidence or secure the indebtedness, will be filed separately in
noninsulated file cabinets with locks. The foregoing documents should be
placed in heavy manila envelopes or folders of suitable size before
filing in safekeeping.

[NOTE: In a loan guaranty case, the assumption agreement, or the copy of
the conveyance deed containing the approved assumption clause obtained
in connection with a release of the veteran\'s liability, should be
filed in the loan folder. If a claim is subsequently paid and a
liability account is established on the guaranteed loan. these
instruments will be removed and placed in safekeeping together with the
instruments evidencing the indebtedness. (See par, 2.51.)]{.underline}

c\. [Withdrawal of Documents]{.underline}. When any document is
withdrawn, an appropriate entry will be made by the custodial clerk on a
simple charge out card (no form prescribed but VA Form 3025, File Charge
Card, may be used for this purpose) to show the type of instrument
withdrawn, the loan number, the date and the person to whom it is
delivered. When the document is returned to safekeeping, the custodial
clerk will initial the charge out card in an appropriate space and show
the date returned. In the event that all documents are to be removed
from safekeeping, the original of VA Form 26-6801, Custodial Record,
will be given to the custodial clerk for retention in a file until such
time as the documents are returned, when the form will be replaced in
the loan folder.

3-7

M26-3 September 20, 1993

[SECTION II. GUARANTEED AND 38 CFR 36.4600 LOANS]{.underline}

[LIQUIDATION AND CLAIMS SYSTEM]{.underline}

[3.06 GENERAL]{.underline}

a\. LCS (Liquidation and Claims System) is designed (1) to record
defaults reported by loan number, type and purpose of loan, and (2) to
,make readily available the current status of such defaulted guaranteed
and 38 CFR 36.4600 loans, as well as the current status of notices of
intention to foreclose filed, and guaranteed loans pending liquidation.
It reflects the status of each default pending (i.e., defaults which
have been coded into the system upon receipt of VA Form 26-6850, Notice
of Default, or other acceptable notice) but which has not been cured or
resulted in a claim; and for each defaulted loan pending liquidation
(i.e., defaults which have been coded in the system upon receipt of VA
Form 26-6850a, Notice of Default and Intention to Foreclose, or VA Form
26-6851, Notice of Intention to Foreclose) but which has not been cured
or terminated by foreclosure, voluntary conveyance or repossession. The
-system also maintains a record of borrower and servicer contacts by VA,
financial counseling, intervention actions by VA, defaults cured,
liquidations completed, and claims filed, vouchered and pending. In
addition, certain basic information and statistical data for management
and report purposes in relation to AMIS (Automated Management
Information System) are provided. VA Handbook H26-82-1, LCS (Liquidation
and Claims System), provides a more complete description of LCS. That
publication gives the mandatory uniform coding instructions for the
proper preparation of all LCS input. The handbook also contains the
system glossary, definitions of edits and audits, details of diary
processing, control point procedures, servicer name and address file
instructions, and numerous illustrations of output and properly coded
input.

b\. [Establishment of Record \-- Notice of Default Field]{.underline}.
Immediately upon receipt of VA Form 26-6850, 26-6850a or other
acceptable form of such notice, it will be forwarded to the designated
LSR (Loan Service Representative) together with the related loan folder,
if available. The LSR will review the notice for timeliness and
completeness of the report and adequacy of the servicing which was
conducted, determine the type of supplemental servicing to be performed,
establish the default status classification, and assign a quality rating
as to the timeliness/completeness of the notice. In making these
determinations the LSR should evaluate whether specific servicing
actions listed in paragraph \[2.32a and b\] were performed. An
appropriate default status code and form letter indicator code (see par.
2.34c or 2.46c) will then be annotated on the face of the notice along
with one of the following numerical quality ratings:

\"3\" All requested information has been provided, including a summary
of the results of personal loan servicing; NOD (Notice of

3-8

M26-3 September 20, 1993

Change 16

Default) was submitted within the \'time limit prescribed by 38 CFR
?6.4315(A) or 38 CFR 36.4600(c)(1).

\"2\" Sufficient information was provided to show,-that the holder had
reasonable basis to conclude that forbearance was or was not warranted
(must include a summary of results of personal servicing unless the
borrower has expressly refused to discuss the default or provide
requested financial information). NOD must have been submitted within
the time limit prescribed by 38 CFR 36.4315(A) or 38 CFR 36.4600(c)(1),
or not more than 30 days late. (This condition may be waived if greater
delay was caused by circumstances beyond the holder\'s control; e.g.,
uncollectible remittances.)

\"1\" Any NOD which is not eligible for classification as \"3\" or
\"2\".

Then the notice of default with the loan folder will be referred to the
control clerk for coding as LCS Stage 1, Notice of Default Received (TT
(transaction type) 500), in one of the following five default statuses
as annotated by the LSR:

Default

[Status]{.underline} [Description]{.underline}

1 [Pending Classification (PENDING).]{.underline} Case is awaiting
development of

> information to permit classification in categories below.

2 [Liquidation of Arrears (LIQ ARR]{.underline}). Case has been placed
on a definite basis for curing

> the delinquency by making periodic payments in excess of the normal
> payments required; the arrangements are satisfactory to VA and to the
> holder, and the liquidation payments are current.

3 [Forbearance Arranged (FORBN]{.underline}). Case is in suspense
because it was determined that

> there is sufficient reason to delay action ending development or a
> cure or a decision that the loan should be terminated and the holder
> has agreed to extend further forbearance.

4 [Insoluble (INSOL]{.underline}). All reasonable efforts to effect a
cure of the default through

> adequate servicing by the holder or supplemental servicing by VA have
> failed; or the circumstances surrounding the default (e.g.,
> abandonment of or absconding with the security) are such that a cure
> appears improbable, and the case will probably result in a claim. (The
> mere filing of a VA Form 26-6850a or 26-6851 is not necessarily a
> proper basis for classifying a default as insoluble unless the facts
> indicate a cure appears improbable.)
>
> 3-9

Default

[Status]{.underline} [Description]{.underline}

5 [Extended Forbearance (XTDFRBN)]{.underline}. The nature of the
default is such that, while there

> is little likelihood of an early cure, there is likelihood that the
> account will become insoluble. This status will be used when
> extraordinary circumstances have forced an otherwise worthy borrower
> into a default which the holder wishes to indulge. (Also used for
> resumed service cases.)

In the event any of the required information to be coded into LCS is
obviously erroneous or missing and cannot be corrected or obtained from
VA records, -the servicer will be contacted for the needed data. Receipt
of the notice of default will be automatically acknowledged by LCS by
computer-generated VA Form 26-8799, Veterans Administration
Acknowledgment, upon processing TT 500. The acknowledgment will be
mailed directly from Austin DPC (Data Processing Center) to the servicer
as identified by the servicer code in the master record. At the time a
default is established in LCS, an RPO (record printout) 23 will be
produced for all cases in which six payments or fewer were made on the
loan account prior to the date of uncured default. Upon receipt of RPO
23, VA records must be reviewed. If the review shows that the loan was
made for the purpose of reducing the interest rate on a previous GI loan
or the RPO was generated due to an LCS coding error, no further review
is required. The related RPO 23 will be so annotated and filed in the
loan. folder after making any necessary corrections to LCS records.
Otherwise, LSR\'s will reverify the veteran\'s employment and deposits
as reported to VA at loan origination, unless the Loan Processing
Section has previously reverified the employment and deposits by
postaudit. An infile credit report will also be obtained for comparison
with the credit report submitted with the loan underwriting package.
When employment or deposits cannot be verified, a field examination will
be conducted in accordance with Manual M26-4, paragraph 2.06e. After the
foregoing has been accomplished, RPO 23 together with the loan folder
will be forwarded to the Loan Processing Section to review the credit
underwriting aspect of the case. If either the Loan Service and Claims
or the Loan Processing Section review indicates that there may be a
basis for reduction or denial of VA\'s guaranty liability due to fraud
or misrepresentation, the Loan Service and Claims Section will prepare
the case for referral to Central Office (26B) in accordance with M26-4.
paragraph 2.06e. COIN LCS 24-01, Liquidation and Claims System RPO 23
Report by Original Lender ID, may be used to check whether the actual
RPO 23 has been processed, and to more readily identify lenders with a
high number (considering their overall volume) of early defaults.

3-10

September 20, 1993 M26-3

Change 16

c\. [Notice of Intention to Foreclose Filed]{.underline}. Upon receipt
of VA Form 26-6851, it will be forwarded to the designated LSR together
with the loan folder, if available. The LSR will review the notice for
completeness and adequacy of servicing performed by servicer and will
determine, on a basis of an analysis of the information received from
the servicer, the type of supplemental servicing to be performed and
assign an appropriate quality rating and default status classification.
If the notice is found acceptable, it will be annotated by the LSR to
indicate the appropriate default status and form letter indicator codes
and one of the following quality ratings:

\"3\" All requested information was provided, including a summary of
personal servicing since filing of the NOD and the prospects for
obtaining a deed in lieu of foreclosure,

\"2\" All requested information was provided but no additional servicing
was done since filing of the NOD, or

\"1\" Any NIF (Notice of Intention to Foreclose) which is not eligible
for classification as \"3\" or \"2.\"

Then it will be referred with the loan folder to the control clerk for
coding LCS Stage 2, Notice of Intention to Foreclose Received (TT 510),
in one of the five statuses of default defined in subparagraph b above.
Receipt of the notice of intention to foreclose will be automatically
acknowledged by LCS by the computer-generated VA Form 26-8799,
Acknowledgment, upon processing TT 510. The acknowledgment will be
mailed directly to servicers from Austin DPC. (This will not be
applicable to loans sold under 38 CFR 36.4600.)

d\. [Submission of VA Form 26-6850a or Simultaneous Submission of VA
Forms 26-6850 and 26-6851.]{.underline} When VA Form 26-6850a is
received, or VA Forms 26-6850 and 26-6851 are received simultaneously,
the provisions of subparagraphs b and c above will apply except that the
notice(s) will be coded on one code sheet and the quality rating for the
NIF data may never be \"3\" since no additional servicing would have
been performed subsequent to the filing of the NOD data. The default
will be LCS Stage 2, and all actions will follow subparagraphs b and c
above. One VA Form 26-8799 will be generated to acknowledge receipt of
both notices. (This will not be applicable to loans sold under 38 CFR
36.4600.)

e\. [Inadequate Servicing of Default]{.underline}. When it is determined
after review of the VA Form 26‑6850, 26‑6850a or 26‑6851, that the
default has not been adequately serviced by the servicer, these forms
will not be returned. However, the servicer should be contacted and
requested to take the necessary default servicing actions and to file an
updated report. LCS automatically generates letters to servicers when
the reporting requirements of 38 CFR 36.4280 or 36.4315 are not met.
Stations will not receive copies of these letters. The system\'s LC4
(Supplemental Servicing Notes) screen has been programmed to document
and display the number of the regulation which was violated, the date

3-11

M26-3

Change 16 September 20, 1993

the notice of default was received, and the number of days the notice of
default was reported late. Regional offices are required to notify
servicers by appropriate individual letters that their claims under
guaranty may be subject to adjustment for failure to comply with the
reporting requirements of 38 CFR 36.4317 (b) , and 36.4600 (c) (1).
Copies of such correspondence, as well as telephone and personal
contacts on these matters, should be placed in the individual
servicer\'s file maintained in the Loan Service and Claims Section.

f\. [Supplemental Servicing by VA]{.underline}. \[CSE Screen TLC 03 is
designed primarily for recording successful VA contacts with borrowers
and servicers, especially when VA intervenes to arrange forbearance or
repayment plans. Servicing efforts in which no personal contact is made
with a borrower (messages left with family members, on telephone
answering machines or at the property during a field visit) should not
be coded into LCS as contacts.\] When servicer or borrower contacts are
coded into LCS, the system will accumulate the number of contacts for
use in the preparation of reports showing the counts for each category
both before and after receiving VA Form 26-6851. On VA intervention
actions, however, the system will only pick up that an entry exists in
the field and it will not maintain an earlier entry. Thus, if VA
arranges a pay plan which is broken, a foreclosure sale date is set, and
the foreclosure is postponed at VA\'s request to allow a private sale,
only the last coded record of intervention will be maintained and the
system will not be aware that two interventions occurred. The reports
prepared on the ultimate results of VA intervention may therefore not
reflect all contacts made by VA; however, the number of borrower and
servicer contacts will be contained in the servicing analysis report
series. Coding of intervention action should be performed as soon as VA
is satisfied that all parties have agreed to the arrangements. The
following codes are to be used, when appropriate, in recording VA
intervention action or payment of a compromise claim in field EH of TT
512:

RAPID ACCESS

[CODE]{.underline} [DISPLAY]{.underline} [EXPLANATION]{.underline}

21 VA Pay Plan Repayment plan proposed by VA is accepted by loan
servicer.

22 Early Forbearance requested by VA prior to initiation of

Forbearance foreclosure is granted by servicer.

23 Later Foreclosure postponed at VA\'s request to honor veteran\'s

Forbearance appeal for additional time to reinstate.

January 28, 1992 M26-3

Change 8

24 Time to Sell Foreclosure postponed at VA\'s request to allow veteran
time

to complete sale of property.

25 \$5,000 Equity Foreclosure postponed at VA\'s request due to
existence of

equity in excess of \$5,000.

30 Predetermination Servicer agrees to forbearance in return for
predetermination of net

value by VA. (See M26-4, par. 2.09e.)

50 Compromise Compromise claim paid. (See M26-4, pars. 2.10 and 3.07.)

Claim

g\. [Loan Folder Retired ,to FRC (Federal Records Center)]{.underline}.
If the loan guaranty folder has, been retired at the time VA Form
26-6850 or 26-6850a is received the notice will be checked against the
GI (guaranteed or insured) Alphabetical Index File to verify the
accuracy of the VA loan number as reported by the holder on the default
notice prior to coding action. Also, the originating lender\'s six-digit
identification number, the GI purpose of the loan and the loan procedure
code, will be extracted from the alphabetical index for use in coding
the NIF data on VA Form 26-6850a, or will be annotated on the VA Form
26-6850 for use in coding the receipt of VA Form 26-6851, if such notice
is received simultaneously with VA Form 26-6850, or for future use in
the event a VA Form 26-6851 is subsequently filed. The Numerical Listing
of Active Master Records May be used to obtain the purpose of the loan
and the loan procedure code if this source is more convenient. The
folder will be recalled from the FRC in accordance with existing
directives promptly [after]{.underline} coding action has been
completed.

h\. [Default Cured]{.underline}. Upon receipt of evidence from the
servicer that the default has been cured, the loan identification and
date of receipt of the evidence of cure will be coded (TT 550). When the
cure is coded, the account will be deleted from the active record of LCS
at the end of the following month. Subsequent defaults must be coded
into the system without consideration of previously cured defaults.
[NOTE]{.underline}: [Care should be exercised to assure that all
paid-in-full notices received on loans in a default status are coded
into LCS to record the default cured.]{.underline}

i\. [Followup to Servicers]{.underline}. The LCS will produce VA Form
26-8778, Request to Lender for Status of Loan Account - LCS, for all
loans in default or termination. A followup to the servicer will be
produced on a daily basis when the diary callup date is reached (no
listing will be sent to regional offices at this time). Then every 30
days on alternate Thursdays another followup to the servicer, together
with a listing to regional offices having jurisdiction, will be
generated for those cases in which the status of loan default has not
been updated in the system. VA Form 26-8802, Followup on Foreclosure
Sale - LCS, will be produced for loans in Stage 4, Status 7

3-13

M26-3

Change 8 Jamuary 28, 1992

(Foreclosure Sale). See subparagraph k(3) below, for the diary callup
intervals when these forms will be mailed to servicers directly from
Austin DPC.

Notice of Default Notice of Intent

[Default Status]{.underline} [Diary Days]{.underline} [Diary
Days]{.underline}

Pending 45 25

Liquidation of Arrears 60 60

Forbearance Arranged 60 60

Insoluble 30 30

(Insoluble - Manufactured

Home Cases) (15) (15)

Resume Service/Extended.

Forbearance 80 180

[NOTE]{.underline}: [Regional offices may code a lesser number of diary
days (shorter intervals) to obtain an earlier call up date.]{.underline}

\(1\) The VA Form 26-8778 contains a section identified \"For VA Use
Only\" which will be used as a code sheet. This section of the form with
the loan identification data preprinted by Austin DPC provides the
necessary coding transactions to update the master record of a loan
account in LCS to reflect a cure (TT 550), or that the status of the
default remains the same as initially reported, or that the status of
the default has changed including changes in diary days and the date of
first uncured default, if applicable (TT 501). Upon receipt at the
regional office of a, completed form from a servicer indicating the
current status of-the default, the form will be forwarded directly to
the Loan Guaranty Division without the related loan folder and referred
to the LSR for review to determine the status of the default and whether
additional supplemental servicing or other action is required. The loan
folder will not be pulled unless the LSR determines, after review of the
circumstances in a particular case, that additional information is
needed. When the review by the LSR is completed, appropriate coding
action will be taken promptly to update the system.

\(2\) After the completed VA Forms 26-8778 have been coded, they will be
batched separately and, after transmission via VADATS (VA Data
Transmission System), retained at the control point until the LCS
Transactions Processed or Rejected List is received from Austin DPC via
VADATS. After verification of input, VA Forms 26-8778 will be filed in
the related loan folders. LCS will produce only an original of VA Form
26-8778. A separate file of photocopies or other reproductions of the
form will not be maintained by regional offices.

j\. [Followup and Updating Changes in Default Status
Classification]{.underline}. Defaults will be called up on diary action
listings by LCS every alternate Thursday 30 days after the generation of
the initial VA Form 26-8778, unless this form or other memorandum has
been

3-14

January 10, 1994 M26-3

Change 19

returned to VA by the servicer and the status of the default has been
updated in the system by appropriate coding. It will be the
responsibility of the designated personnel of the Loan Service and
Claims Section to promptly advise the coding clerk of any change in the
status of each defaulted loan, including no change in status, in order
to eliminate the appearance of as many defaults as possible on diary
action listings and, at the same time, the generation of another VA Form
26-8778 to the servicer. Responses, particularly notices of cures, must
be coded into LCS on a daily basis, preferably on the day such notice is
received. The default status of each default and liquidation pending
will be reviewed and updated within a reasonable time as the
circumstances in the case demand, even though there may be no change in
the default status. For example:

\(1\) [Pending Classification]{.underline}. A default originally
classified as pending should remain so classified unless information
reported by the holder or obtained through supplemental servicing will
permit a change in the classification or the account becomes more than
six payments past due. \[When a loan becomes more than 6 months due, and
the provisions of 38 CFR 36.4319(f) have not been invoked, it will
appear on the serious default action list. It should then be classified
as insoluble and LCS should be updated to reflect this classification,
unless documentation exists to support a different classification.\]

\(2\) [Liquidation of Arrears or Forbearance Arranged]{.underline}. A
loan default in this classification appearing on the diary action
listing has most probably not been reviewed for 90 days from the receipt
date of VA Form 26-6850, 26-6850a, or 26-6851 because the servicer has
failed to respond to VA Form 26-8778. Accordingly, if a servicer does
not respond to the second request (VA Form 26-8778 mailed to servicer an
same day that the diary action list was produced) within 15-calendar
days from receipt of the diary action list, the servicer will be
contacted by telephone to ascertain the current status of the loan
account. The results of the telephone conversation will be documented in
the loan folder and appropriate coding action taken, if required.

\[(3) [Insoluble]{.underline}. The filing of VA Form 26-6850a or 26-6851
is not, by itself, a proper basis for classifying a default insoluble. A
default should only be classified as insoluble when all reasonable
efforts to effect a cure, both by the servicer and VA, have been
attempted and failed, or the circumstances surrounding the default
(e.g., abandonment or seizure of the property) indicate that a cure is
unlikely and the default will result in a claim. Defaults in an
insoluble status should be reviewed at least every 30 days to determine
that liquidation is not being unduly delayed and to reconsider for a
cutoff under 38 CFR 36.4319(f). When a cutoff is not deemed appropriate,
the loan record should be documented to explain this decision, and the
default should continue to be closely monitored to assure that the
liquidation is not being unduly delayed.\]

3-15

M26-3 January 10, 1994

Change 19

k\. [Liquidation of GI Loan]{.underline}

\(1\) [General]{.underline}. LCS controls the liquidation process in the
same manner that defaults are controlled prior to liquidation. The
methods of liquidation are categorized into two primary stages:

Stage 3 - Terminating a loan by a deed in lieu of foreclosure.

Stage 4 - Terminating a loan by a foreclosure or repossession.

The two primary stages are system generated upon the processing of TT
520\[. In foreclosure cases, the TT 520 is generated from CSE (code
sheet elimination) screen TLC 04 LCS FORECLOSURE, using information
extracted from VA Form 26-8754, Liquidation Code Sheet (LCS-VADATS). In
deed in lieu of foreclosure cases, the TT 520 is generated using CSE
Screen TLC 05, LCS DEED-IN-LIEU using information extracted from VA Form
26‑8755, Deed-in-Lieu Code Sheet (LCS-VADATS).\] Within these two
primary stages of liquidation, LCS maintains the loans in certain basic
statuses indicating the significant steps in the termination procedure.
These statuses are as follows:

[STAGE 3 - DEED IN LIEU OF FORECLOSURE]{.underline}

Liquidation

[Status Codes]{.underline} [Description]{.underline}

1 Deed in lieu of foreclosure considered

2 Deed in lieu of foreclosure accepted

3 Deed in lieu of foreclosure not accepted

4 Deed in lieu of foreclosure recorded

[STAGE 4 - FORECLOSURE/REPOSSESSION]{.underline}

5 Date breach recorded (power of sale)

5 Date complaint filed (judicial foreclosure)

6 Date of first publication (power of sale)

6 Date of decree or judgment filed (judicial foreclosure)

7 Date of foreclosure sale

8 Date liquidation completed or manufactured home repossessed

\(2\) [Deed in Lieu of Foreclosure]{.underline}. After reviewing all the
facts in a particular case as provided by M26-4, paragraph 2.18, and it
is determined that it would be in the Government\'s best interest to
accept a deed in lieu of foreclosure, coding action will be taken to
record the following steps in terminating a loan by a deed in lieu of
foreclosure. The following table shows the maximum system-generated
callup days for loans in a Deed in Lieu of Foreclosure Stage 3. If it

3-16

January 28, 1992 M26-3

Change 8

is determined that a deed in lieu of foreclosure is not acceptable,
appropriate coding action will be taken and the default will be called
up every 30 days as an insoluble default until such time as the
foreclosure action is coded into LCS.

Reason

[Code]{.underline} [Description]{.underline} [System-Generated
Intervals]{.underline}

21 Followup on deed Every 30 days from date deed in lieu is considered.

considered.

22 Followup on deed Every 30 days from date deed in lieu is accepted.

accepted

24 Followup on deed 30 days from date deed in lieu is recorded and every
15

recorded days thereafter until property transfer voucher is paid.

3-16a

January 7, 1992 M26-3

Change 7

\(3\) [Terminating Loan by Foreclosure]{.underline}. Loans being
terminated by the foreclosure process will be monitored closely by LCS.
In order to do so, each significant step in the foreclosure process must
be coded into LCS upon receipt by VA of such notice. The following table
shows the maximum system-generated callup days for loans in a
Foreclosure Stage 4:

Reason

[Code]{.underline} [Description]{.underline} [System-Generated
Intervals]{.underline}

25 Followup on 130 days from date breach is recorded and every 30 days

breach recorded thereafter until publication is known.

25 Followup on 180 days from date complaint is filed and every 30 days

complaint filed thereafter until decree/judgment entered.

26 Followup on 60 days from date of first publication or decree/judgment

publication or entered and every 30 days thereafter until foreclosure
sale

decree/judgment date is known.

27 Followup on Every 20 days from date of foreclosure sale until
disposition

foreclosure of property is known (liquidation completed).

sale

28 Followup after 30 days from date of election to convey and every 15
days

election to thereafter until property convey transfer voucher is paid.

Due to wide variance in the several States in the time elements between
the various steps in the foreclosure process, each regional office is
required to establish reasonable diary days less than the
system-generated maximum intervals for callup, depending on the State
law that applies. A followup to the servicer; i.e., VA Form \[26-8778\],
will be produced on a daily basis when Diary Reasons 15 and 16 callup
date is reached (no listing will be sent to regional offices at this
time). The diary reason is printed at the top of VA Form \[26-8778\] to
indicate whether it is the first or subsequent letter sent to the
servicer. Then every 30 days on alternate Thursdays another followup to
the servicer, together with a listing to regional offices having
jurisdiction, will be generated for those cases with Diary Reason Codes
25 and 26 only when the status of the termination action has not been
updated in the system. The VA Form \[26-8778\] contains a section
identified \"For VA Use Only\" which can be used as a code sheet. This
section of the form with the loan identification data preprinted by
Austin DPC provides the necessary coding transactions to update the
master record of a loan account in LCS to reflect a cure ( TT 550) , or
that the status of the foreclosure action has been rescinded (e.g.,
complaint filed but servicer has agreed to repayment plan or additional
forbearance has

3-17

M26-3

Change 7 January 7, 1992

been extended - TT 501, Change in Default Status) ; or that the next
procedural step to foreclose the loan has been accomplished (TT 520,
Change in Termination Status 5 or 6). VA Form 26-8802 will be produced
on a daily basis, one time only, when the diary date is reached
(system-generated 20 days after foreclosure sale date when disposition
of property has not been coded into the system). Upon receipt at the
regional office of a completed VA Form \[26-8778\] or response to VA
Form 26-8802, the form or response will be forwarded to the Loan
Guaranty Division with the related loan folder for review and
appropriate disposition. When coded and used as an input document, VA
Forms \[26-8778\] will be batched and processed \[I as described in
subparagraph i(2) above. VA Form 26-8802 is not designed as an input
document. When results of the foreclosure sale are known, coding action
will be taken utilizing the VA Form 26-8754.

1\. [Claims]{.underline}

\(1\) [Claim Filed]{.underline}. Upon receipt of an acceptable claim
under loan guaranty or holder\'s final accounting or repurchase of loan
under 38 CFR 36.4600, appropriate coding action to update the LCS master
record will be taken.

\(2\) [Claim Denied]{.underline}. Claim denied coding will not be used
until after appropriate review has been made by Central Office (261) as
provided by M26-4, paragraph 2.06.

\(3\) [Claim Vouchered]{.underline}. At the same time a claim under loan
guarantee holder\'s final accounting, or repurchase of a loan under
accounting, or repurchase of a loan under 38 CFR 36.4600 has been
approved and forwarded to the Finance activity, appropriate coding
action to update the LCS master record will be taken.

\(4\) [Controls to Assure Prompt Payment of Claim for Repurchase of a 38
CFR 36.4600 Loan by VA and Reestablishment of Vendee Account in PLS
System]{.underline}. Upon receipt of RPO 60 from LCS, which indicates a
38 CFR 36.4600 loan claim for repurchase has been vouchered for payment
by Loan Guaranty (TT 536, -KF), the RPO will be retained in a holding
file pending receipt of RPO 62 from PLS indicating the loan has been
reestablished in PLS. If RPO 62 from PLS is not received within 15 days
from the date of LCS RPO 60, appropriate followup will be made with
Finance activity to assure prompt payment for repurchase and
reestablishment of the vendee account in PLS.

\(5\) [Compromise Claims]{.underline}. A compromise payment is not
vouchered as a claim and requires unique coding action in LCS. TT 512,
field EH, Intervention Action, must be completed with the code \"50,\"
and TT 550, field MA, Date of Receipt, must be completed with the date
the compromise is paid (see M26-4, pars. 2.10 and 3.07).

3-18

September 26, 1988 M26-3

[3.07 FILING LOAN FOLDERS]{.underline}

It is suggested that when a default is determined to be insoluble, the
loan folder be withdrawn from the file and custody assigned to the Loan
Service and Claims Section. It will remain there until the default is
cured, or the loan is paid in full or otherwise terminated.

[SECTION III. VOUCHERING PROCEDURE]{.underline}

[3.08 GENERAL]{.underline}

a\. [Forms of Vouchers]{.underline}. In addition to standard voucher
forms SF 1034, Public Voucher for Purchases and Services Other Than
Personal, the term \"voucher\" is considered to include such evidence of
amounts due and payable as: the original VA analysis, accompanied by the
holder\'s statement of the mortgage loan account to be purchased by VA;
bills; invoices; hazard insurance renewal premium notices; and listings
of individual taxes, assessments, or other such charges when obtained in
accordance with paragraphs 2.07 and 2.08. if necessary or advisable,
payment will be processed by means of SF 1034; a sufficient number of
copies (SF 1034a, Public Voucher for Purchases and Services Other Than
Personnel (Memo)) will be prepared to include one to accompany the check
to the payee and one for retention in the related folder.

b\. [Required Information]{.underline}. Subject to the modifications
shown in the succeeding paragraphs of this section, the voucher used
must contain or be completed to show the following information or by
attachment:

\(1\) Name and address of payee;

\(2\) Date, and

\(a\) a concise statement to identify the purpose of payment; or

\(b\) a description of articles furnished or services rendered itemized
if necessary for the record);

\(3\) Amount due and payable;

\(4\) If an advance by VA is involved, show the word \"ADVANCE\"
opposite the related dollar amount. Exception: This requirement normally
may be disregarded on vouchers processed for payments from the T and I
(tax and insurance) account, since necessary advances by VA for these
items are otherwise provided for.

\(5\) Borrower\'s name;

\(6\) Complete VA loan number (show holder\'s loan number also, when
applicable);

M26-3 September 26, 1988

\(7\) Administrative certification over the signature of the authorized
personnel of the Loan Guaranty Division, as follows:

\(a\) \"Payee is entitled to the payment described herein,\" and

\(b\) When prior Central Office approval is required, add: \"Such
payment was approved by Central Office (letter or teletype) dated
\_\_\_\_\_\_\_\_\_\_\_.\"

[3.09 TAXES AND ASSESSMENTS]{.underline}

(Also see par. 2.07.) The original bills obtained for taxes,
assessments, ground rents, or other such charges which are, or may
become, liens against the property must be receipted by the payee and
returned to VA when payment is made. (See par. 2.07f for disposition of
receipted bills.) Exceptions to this requirement would be proper if: (1)
Upon receiving payment, local authorities customarily will return
individual forms of receipt; e.g., a receipted duplicate of the tax
bill; or (2) The items paid are shown individually and totaled on a list
when, in lieu of tax bills, is receipted and returned by special
arrangement with local authorities. (See subpar. b(l) below.)
Subparagraphs a and b below contemplate that original bills only will be
furnished and, except as otherwise noted, it may be necessary to process
payment with voucher forms SF 1034 and 1034a. However, it is the
practice of some local tax authorities to furnish bills in duplicate,
only one of which is required to be returned with the payment. In such
cases the original bills, if available for retention by the Finance
activity, will constitute proper vouchers when completed individually or
by attachment to show any additional information required as explained
in paragraph 3.08b. The original bills will be processed for payment and
the related duplicates attached for submission to the payee.

[NOTE]{.underline}: [Whatever form of voucher is used, it will be
accompanied by a self-addressed, franked envelope and an appropriate
request to enclose return receipts in the envelope provided. The
envelope and request will be forwarded to the payee with the check and
tax bills (if any), or a copy of the certified list previously obtained
in lieu thereof. (See subpar. b(1) below.)]{.underline}

a\. [Individual Payments]{.underline}. The voucher form SF 1034 will be
prepare in accordance with paragraph 3.08 when it becomes necessary to
pay a single tax bill. It will be processed for payment with the tax
bill attached to the payee\'s copy (SF 1034a) for receipt and return.

b\. [Group Payments]{.underline}. Subject to program segregation when
necessary (see subpar. (2) below), bills payable on the same date to the
same tax authority will be totaled and processed for payment in one
check. Voucher SF 1034 will be prepared and processed in accordance with
paragraph 3.08 for the total amount payable. A

3-20

September 26, 1988 M26-3

list, attached to the original and all copies of the voucher (SF 1034a),
will identify the individual loan accounts involved by name and number
and the portion of the total tax payment allocated to each. The bills
will be attached to the payee\'s copy of the voucher.

\(1\) [Alternate Procedure]{.underline}. Paragraph 2.07a(1) provides for
a possible arrangement with the tax authorities to show the assessed
value and the tax payable for each property on a list supplied by VA for
the purpose. When completed to show the additional information required
(par. 3.08b), such list may be processed as a voucher for payment of the
total amount due; the bills will be attached for receipt and return. If
no bills are furnished, the list will have been certified by the payee
and a copy will be attached for receipt and return, in lieu of the tax
bills.

\(2\) [Program Segregation]{.underline}. It is necessary to distinguish
between payments under the direct loan program and those under the loan
guaranty program. Therefore, group payments may require separate lists.
The bills may be commingled in some regional offices in which mechanical
procedures will automatically provide separate totals to show this
distinction. Otherwise the bills, as identified by the prefix in the
loan number, will be segregated and processed for payment in two groups
as follows:

\(a\) Direct loans (prefix DL) and direct loan vendee accounts (prefix
DV);

\(b\) All other VA portfolio loans.

[3.10 OTHER EXPENSES OR ADVANCES BY VA]{.underline}

[Type]{.underline} [Refer to]{.underline}

Repairs to the Security Property Pars. 2.04 and 2.05

Hazard Insurance Renewals Pars. 2.06 and 2.08

Foreclosure or Other Liquidation by VA Par. 3.12

Unless bills are obtainable in duplicate, with the exception of bills
for hazard insurance renewals, a true copy will be made for the record
and retained in the loan folder. (See par. 2.08h(1) for disposition of
paid insurance premium notices.) The original will constitute a proper
voucher when completed to show the additional information required as
explained in paragraph 3.08. Receipts are not required.

a\. [Certification by Payee]{.underline}. Ordinarily, certification of
bills or invoices by the payee is not required. Still, it is recognized
that the circumstances in a particular case may indicate the
advisability of obtaining a certification for the proper protection of
the Government\'s interests. Therefore, in such cases, the Director or
designee may direct that a certification, in suitable form and in
sufficient detail according to the circumstances, be obtained before the
bill or invoice is processed for payment.

3-21

M26-3 September 26, 1988

b\. [Group Payments]{.underline}. Subject to program segregation when
necessary (see par. 3.09b(2)), bills payable to the same payee may be
totaled and processed for payment in one check. A listing of the items
comprising the total will identify the individual loan accounts involved
by (1) name; (2) loan number; (3) insurance policy number when
applicable (or other information sufficient for identification by the
payee of the bills covered); and (4) the portion of the total payment
allocated to each. The original bills (with the list and a copy for the
payee attached) will be processed for payment when completed to show any
additional information required by paragraph 3.08b.

[3.11 ACCOUNTING CLASSIFICATIONS]{.underline}

a\. Except as indicated in subparagraph b below for preobligated
expenses, and provided vouchers are completed in strict accordance with
paragraph 3.08, it will be unnecessary for the Loan Guaranty Division to
show specific appropriation and benefit expense symbols. For example,
the proper classifications will be evident from (1) the prefix in the
loan number; (2) the description of articles or services or the
statement concerning the purpose of payment; and (3) when applicable,
the word \"ADVANCE\" shown opposite the amount involved. If desired,
however, an arrangement may be made between the Finance activity and
Loan Guaranty for the latter to show the proper accounting
classifications. This may be done by completing a rubber stamp prepared
for that purpose, or otherwise.

b\. [Preobligated Expenses]{.underline}. For expenses requiring
preobligation, it will be necessary to show the appropriation or fund
symbols, allotment account and obligation numbers. This additional
information will be placed on the voucher processed for payment, or on
the supporting authorization document.

[3.12 FORECLOSURE AND OTHER LIQUIDATION EXPENSE]{.underline}

Expenses incident to the termination of a direct loan generally are
chargeable to the indebtedness (or deductible from the gross proceeds of
sale) regardless of local law. Whether such expenses are so chargeable
on other types of VA portfolio loans will depend on the terms of the
loan instruments and local law. In case of doubt, the advice of the
office of District Counsel will be obtained before processing payment.

a\. [Preparation and Processing]{.underline}. When items are to be paid
by VA for trustee fees, legal tees, court costs, recording fees and
other such liquidation expenses, bills will be obtained (in duplicate if
possible) and processed for payment in accordance with paragraph 3.10.
It will have been determined, as set forth above, whether the items of
expense are chargeable to the mortgage indebtedness. The amount payable
will be identified on the voucher (original bill) with the word
\"ADVANCE\" is so chargeable, or the words \"CAPITAL CHARGE\" if not so
chargeable.

3-22

February 10, 1993 M26-3

Change 15

b\. [Appraisal Fees]{.underline}. Normally, VA will assume necessary
expenses for appraisals obtained incident to the termination of
portfolio loans. However, in the event an account is reinstated, any
expense incurred or paid by VA for an appraisal of the property in
connection with the intended liquidation of the loan will be charged to
the indebtedness if legally permissible under the provisions of the loan
instruments or otherwise collected from the borrower.

c\. [Prepayment]{.underline}. Arrangements have been made in which the
office of District Counsel may obtain vouchers and cash from the agent
cashier if necessary to meet local requirements for the prepayment of
court costs. In the absence of bills, voucher SF 1034, with a copy (SF
1034a) for the loan folder will be prepared for this purpose. When cash
is delivered to payees, their signature will be obtained on the vouchers
for return to the agent cashier.

d\. [Petty Cash]{.underline}. Advances up to \$50 in cash at any one
time may be obtained by the office of District Counsel when necessary
for the prepayment of court costs. The unused portion of such an advance
and receipts covering expenses paid will be returned to the agent
cashier, together with the related loan number, name of borrower
involved and the purpose of the payment. The agent cashier will be
requested to include this information with the amount paid in a written
advice to Loan Guaranty for retention in the loan folder.

[SECTION IV. LOAN MANAGEMENT FORMS AND FORM LETTERS]{.underline}

[\[3.13 VA FORM 6495a, STATEMENT OF LOAN AMOUNT ON PORTFOLIO
LOANS]{.underline}

Gives borrowers information on the principal balance, interest and
property taxes paid, as well as amounts in the tax and insurance escrow
fund.

[Reference]{.underline}

Par.
2.06d(3)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Borrower\'s Statement of Loan Amount

[3.13a VA FORM 26-0173, SERVICING TRANSFER]{.underline}

Advises vendee of a servicing transfer on a portfolio loan 15 days
before sale of the loan by VA.

[Reference]{.underline}

Par.
2.45d(8)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Notification of Servicing Transfer

[3.13b VA FORM 26-0530, PAYMENT NOTICE ON PORTFOLIO LOANS]{.underline}

Advises homeowner of regular installment, unpaid amounts, and advances
due to insufficient funds that are due on the loan.

Par. 2.06c and
d\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Mortgage Loan Payment Notice\]

3-23

M26-3 February 10, 1993

Change 15

[3.14 VA FORM 26-6379, PROGRESS SHEET ON APPLICATION FOR
RELEASE]{.underline}

> [FROM LIABILITY OR SUBSTITUTION OF ENTITLEMENT (UNDER SECTIONS 1817
> AND 1820(a)(4) OR 1802(b)(3), TITLE 38, U.S.C.)]{.underline}

A progress sheet will be maintained on each case in which an application
for a release from liability is filed and will be kept in the loan
folder.

[Reference]{.underline}

Par.
2.56\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Internal Records

[3.15 VA FORM 26-6380, REGISTER OF APPLICATIONS FOR RELEASE
FROM]{.underline}

[LIABILITY UNDER SECTIONS 1817(a) AND 1820(a)(4) AND SUBSTITUTION OF
ENTITLEMENT]{.underline}

One register will be maintained on the form provided to serve as a
source for statistical data and as a locator device.

[Reference]{.underline}

Par.
2.56\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Internal Records

[3.16 VA FORM 26-6380a, REGISTER - RELEASE FROM LIABILITY
UNDER]{.underline}

[SECTION 1817(b)]{.underline}

A register will be maintained as a record of the disposition of all such
cases.

[Reference]{.underline}

Par.
2.60\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Internal Records

[3.17 VA FORM 26-6381, APPLICATION FOR RELEASE FROM
PERSONAL,]{.underline}

[LIABILITY TO THE GOVERNMENT ON A HOME LOAN]{.underline}

One of the above forms is to be sent the veteran applicant with FL
26-557 or 26-557a with other attachments, after filling out section I of
the form. Section II of the form is to be completed by the
veteran-applicant, and the form is to be returned by the veteran to VA
with the required enclosures; i.e., remittance for credit report, deed
or copy thereof which the veteran received from his or her grantor, and,
in cases in which the veteran-applicant is the owner, copy of the sales
contract if one has been executed. The information required to be
furnished on the form by the veteran­applicant will identify the veteran,
the property, the assumer, the status of the sale transaction, and the
holder or servicer. The form will be filed in the loan folder.

[References]{.underline}

Par.
2.49\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Release from Liability Procedures

Par.
2.50\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Release from Liability Procedures

3-24

M26-3

February 10, 1993 Change 15

[3.18 VA FORM 26-6382, STATEMENT OF PURCHASER OR OWNER
ASSUMING]{.underline}

[SELLER\'S LOAN]{.underline}

The regional office will fill out section I of the form and forward it
to the veteran for delivery to his or her prospective assumer who must
complete section II of the form and return it directly to VA with the
completed VA Form 26-6807. Provision is made for assent by the
prospective assumer to the use of the financial statements both by VA
and the holder of the mortgage and requires the assumer to reveal (a)
the purchase price and (b) any secondary financing incurred or to be
incurred in connection with

3-24a

January 28, 1992 M26-3

his or her purchase of the property. Items (a) and (b) immediately above
have a direct bearing on credit acceptability, and VA Form 26-6807 is
not designed to elicit this information.. Upon return of the prospective
assumer, it will be filed in the loan the form by folder.

[References]{.underline}

2.49a, c and d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Release of Liability Procedures with

Clause in Conveyance Deed

Par. 2.50a, c and d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Release of Liability Procedure when

Clause in Conveyance Deed is-not Acceptable

[3.19 VA FORM 26-6393, LOAN ANALYSIS]{.underline}

VA Form 26-6393 is used in accordance with the requirements of M26-1 and
M26-6 and becomes a part of the record filed in loan folders for
guaranteed, insured, direct and vendee loan accounts, as well as cases
involving a release of liability under 38 CFR 36.4323(f) or 36.4508(b).

[References]{.underline}

Pars. 2.48 -
2.57\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Release of Liability

Par.
3.01a\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Direct Loan Records

Par.
3.01b\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Vendee Account Records

[3.20 VA FORM 26-6713, SUMMARY OF BASIS FOR LIQUIDATION
PROCEDURE]{.underline}

Self explanatory form for use in connection with a determinatiion of the
amount to be specified (if any) under 38 CFR 36.4320 and the amount of
the maximum bid (if any) in the liquidations of VA portfolio loans.
\[Items 9 through 21 should be rounded to the nearest whole dollar.)

[References]{.underline}

Par. 2.13c,
M26-4\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Application of 38 CFR 36.4320

Par. 2.16,
M26-4\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Computation of Specified Amount

Par. 2.27e\...\...\...\...\...\...\...\...\.... Submission of Loan
Folder to Director or Loan Guaranty Officer

Par.
2.29a(1)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Computation of Maximum Bid

[3.21 VA FORM 26-6714, SALES CLOSING STATEMENT]{.underline}

Prepared in connection with the sale of property owned by VA and
submitted by Property Management Section to Loan Service and Claims
Section with other pertinent documents for review.

3-25

January 28, 1992 M26-3

Change 8

[References]{.underline}

Par. 2.01b(l)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Examination of Loan Documents

Par. 3.01b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Vendee Accounts

Par. 3.03b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Vendee Account Folders

[3.22 VA FORM 26-6715, RECORD OF TELEPHONE CONVERSATION]{.underline}

Self-explanatory form to be dated, signed and filed in the loan folder
for telephone calls made or received in connection with a loan account.

[References]{.underline}

Par. 2.20d(1)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Delinquent Initial Installment

Par. 2.20e(2)(b)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Servicing Actions

Par. 2.34d(2)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Telephone and Telegraph

[3.23 VA FORM 26-6724, INVITATION, BID, AND/OR ACCEPTANCE
OR]{.underline}

[AUTHORIZATION]{.underline}

This is essentially a property management form, but adaptable for use in
obtaining bids when advisable in cases of serious repairs to properties
securing VA portfolio loans. Cross out \"PM No.\" and insert the loan
number in the space provided. The form may be used when advisable to
obtain an itemized list of necessary repairs and cost estimates (see
par. 2.03b), in which case the completed estimate will be retained in
the loan folder. Upon approval of the repairs deemed necessary, a list
will be reproduced on VA Form 26-6724 (omitting the cost estimates) in
sufficient quantity for distribution. in duplicate by the. borrower to
contractors for -,their Invitation, bid, and acceptance. These copies
will be forwarded to the borrower with instruction to obtain competitive
bids. (See par. 2.04.) One signed copy of each contractor\'s bid will be
returned for retention in the loan folder; the duplicate is for the
contractor\'s record. Staff technicians will assist in determining which
bid is acceptable. The file will be documented accordingly and the
borrower promptly notified that VA will advance funds in the amount of
the lowest acceptable bid. If the borrower authorizes a contractor who
made a higher bid to proceed with the work, funds equal to the
difference in the bids will be obtained and held in the appropriate
account pending disbursement upon proper completion of the work. If a
bid is unacceptable for any reason other than the amount of the bid, the
borrower will be notified not to authorize the particular contractor
involved to proceed with the work.

[References]{.underline}

Par. 2.03b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Necessary Repairs

Par. 2.04
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Repair or Restoration of Property

Par. 2.09d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Repair or Restoration of Security

Par. 2.11e
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Application of Proceeds

3-26

September 26, 1988 M26-3

[3.24 VA FORM 26-6801, CUSTODIAL RECORD]{.underline}

a\. Self-explanatory form, prepared in duplicate, providing for one or
more instruments to be placed in safekeeping. The individual responsible
for safekeeping will sign the original which will then be placed in the
loan guaranty folder as a receipt. The duplicate will be filed by the
custodial clerk alphabetically by name of borrower, or numerically be
loan number.

b\. The file of duplicate VA Forms 26-6801 will be maintained by the
custodial clerk to provide a record of all documents changed and/or
added to the files in safekeeping during 1 year (i.e., the period
between the scheduled annual date established for microfilming additions
and/or changes to the file of securing documents, per PM-1, pt. II, chi.
8, app. B, item No. 50-1). Duplicate VA Forms 26-6801 accumulated in
this file during the year will be used to select the related documents
in time for the scheduled annual microfilming. following the annual
microfilming, the duplicate copies of VA form 26-6801 used to identify
the related documents will be destroyed as control media in accordance
with RCS VB-1, part I, item No. 12-111.200.

c\. When a document is [permanently]{.underline} removed from the
safekeeping files (because of payment in full or other release), the
original VA Form 26-6801 will be removed from the loan guaranty folder
and retained by the custodial clerk. The original copies of VA Form
s26-6801 designating permanent deletions from the safekeeping file will
be maintained in a separate file by the custodial clerk; i.e., they will
be definitely segregated from (1) the VA Form 26-6801 file designating
temporary removals from the document file (par. 3.05c), or (2) the file
of duplicate copies maintained for identification purposes (subpar. b
above). The originals accumulated since the previous filming of security
instruments will serve as an index to documents deleted from the
safekeeping files since the last filming, and will be filmed at the
beginning of the first reel at the next scheduled microfilming period.
Following the annual microfilming the original copies of VA Form
26-6801, which have been included in the film as a record of documents
deleted from the safekeeping files, will be destroyed as control media
in accordance with RCS VB-1, part I, item No. 12-111.200.

[References]{.underline}

Par. 2.38k
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Establishment of Acquired Loan Account

Par. 3.01a
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Direct loan Records

Par. 3.01b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Vendee Account Records

Par. 3.01c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Acquired Loan Records

Par. 3.03b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Vendee Account Folders

Par. 3.05
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Documents in Safekeeping

3-27

M26-3 September 26, 1988

[3.25 VA FORM 26-6807, FINANCIAL STATEMENT]{.underline}

Will be completely executed by the borrower whenever advisable (with VA
assistance if necessary) and if there is a question of the borrower\'s
financial condition in connection with efforts to rein­state seriously
defaulted guaranteed, insured, or portfolio loans. It will be restricted
to information obtained direct from the borrower or immediate family; it
is not intended to contain informa­tion obtained from outside sources.
When completed and signed by the parties giving the information, it will
be reviewed and filed in the loan folder. Since the information is
confidential, only one copy will be prepared.

[References]{.underline}

Par. 2.20f
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Field Servicing

Par. 2.20g(1)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Delinquent Loans

Par. 2.22i
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Repayment of Arrears

Par. 2.34f
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Field Report

Par. 3.03c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Acquired Loan Folders

[3.26 VA FORM 26-6807a, SUPPLEMENTAL CERTIFICATION FOR
FINANCIAL]{.underline}

[STATEMENT]{.underline}

Will be executed as a supplement to VA Form 26-6807 when favorable
consideration has been given to refunding under 38 CFR 36.4318 or
purchase under 38 U.S.C. 1820. Its main purpose is to obtain written
acceptance by the borrower of certain conditions under which VA will
refund the indebtedness.

[References]{.underline}

Par.
2.06\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Maintenance of T and I Deposit Account

Par. 2.38j
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Acquisition Procedure

Par. 3.03c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Acquired Loan Folders

[3.27 VA FORM 26-6808, LOAN SERVICE REPORT]{.underline}

This provides a multipurpose form of report of field interviews,
in-office interviews, or telephone contacts made in connection with the
servicing of outstanding VA guaranteed, insured, 38 CFR 36.4600 and
portfolio loans.

a\. Except for field servicing performed by personnel stationed at a
location other than in the regional office (see subpar. b below) an
original of the form will suffice, and it will be filed in the loan
folder after appropriate action.

b\. For field servicing performed by personnel stationed at a location
other then the regional office, the form will be prepared in duplicate
with available data and any necessary instructions followed by the date.
The original is forwarded promptly to the field representative to be
completed and returned, and the duplicate will be filed for reference in
the loan folder.

3-28

September 26, 1988 M26-3

c\. The completed loan service report will be reviewed upon its return
and appropriate action taken in accordance with manual requirements.
Thereafter, the report will be filed in the loan folder replacing the
duplicate previously prepared, which will be disposed of in accordance
with RCS VB-1, part 1, item No. 13-052.100.

d\. For portfolio loans, the latest RPO will be attached to the original
of the form and will remain with the form throughout the procedures set
forth in subparagraphs a through c above.

[References]{.underline}

Par. 2.20d(1)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Delinquent Initial Installment

Par. 2.20e(2)(b)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Servicing Actions

Par. 2.20f
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Field Servicing

Par. 2.20g(1)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Delinquent Loans

Par. 2.22a
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Field Collections

Par. 2.22c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Loan Service Report

Par. 2.22i
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Repayment of Arrears

Par. 2.22j
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Chronic Delinquents

Par. 2.34d(2)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Telephone and Telegraph

Par. 2.34d(3)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Office Interviews

Par. 2.34f
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Field Report

Par. 2.46d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Supplemental Loan Servicing

Par. 3.03c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Acquired Loan Folders

[3.28 VA FORM 26-6816, LOAN MANAGEMENT REGISTER]{.underline}

When checked in the appropriate box for vendee accounts, this form will
be used to assign and control vendee account numbers. If desirable for
the timely assignment of vendee account numbers, this form may be
maintained in the Property Management Section. When checked in the
appropriate box for acquired loans, it will be used to list the existing
loan number, to which the proper prefix and suffix will be added for
identification. The \"Date of Loan\" is for vendee accounts and means
the date of the security instruments; the \"Date of Acquisition\" is for
acquired loans and means the date of the settlement. Otherwise, the
columns are self-explanatory.

[References]{.underline}

Par. 3.01b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Processing Vendee Account Records

Par. 3.01c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Processing Acquired Loan Records

Par. 3.02c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Vendee Account Numbers

Par. 3.02d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Acquired Loan Numbers

[3.29 VA FORM 26-6820, ADVICE OF CHANGES IN TERMS OR STATUS
OF]{.underline}

[PORTFOLIO LOAN]{.underline}

Provides a uniform procedure for advising the Finance activity of
interim changes in the loan account. Prepared in duplicate immediately
after the change is accomplished; original forwarded to the Finance
activity; duplicate retained in the loan folder.

3-29

M26-3 September 26, 1988

a\. [Section I - Tax and Insurance Account]{.underline}. Show any
changes in the T and I account. Advances for the purpose of paying these
items, but which do not effect a revision of deposits required in this
account, will be reported under section II.

[Reference]{.underline}

Par. 2.06b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Adjustments to T and I Account

b\. [Section II - Advances]{.underline}. Show advances for repair and
restora­tion of the property, or for taxes, assessments, hazard
insurance, or for the payment of primary mortgage installments
regardless of the arrangement for repayment. If the advances result in a
change in required installment payments, including deposits to the T and
I account, the appropriate section will be completed to reflect such
change.

[References]{.underline}

Par. 2.05
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Advances to Protect Security

Par. 2.06d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Advances to the T and I Account

Par. 2.221(1)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.... Advance to
T and I Account on Extension of Loan

c\. [Section III - Disposition of Proceeds Received]{.underline}. For
advice as to the disposition of funds being held in suspense, involving
the proceeds of insurance loss settlements, partial releases of security
(voluntary or through condemnation), or royalties and other payments
received and held in connection with mineral rights. For example, this
section will be used when, in accordance with paragraph 2.04, completed
repairs or replacements are to be paid for out of funds received through
an insurance loss settlement or otherwise.

[References]{.underline}

Par. 2.04d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Payment of Repairs

Par. 2.09d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Insurance Loss Repair Payments

Par. 2.09d(1)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Credits Arising From Insurance Loss Proceeds

Par. 2.11e
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Proceeds of Partial Releases

Par. 2.13
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Proceeds of Mineral Rights

d\. [Section IV - Forbearance Granted]{.underline}. Show changes in the
payment schedule resulting from the execution or extension of a
modification agreement, the acceptance of a compromise offer, or the
formal acceptance or reduced payments for a specified period without
recasting the loan. Show here also any change which results in a later
installment due date than that required by the loan instruments.

[References]{.underline}

Par. 2.20b(2)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Installment Due Date

Par. 2.24a(2)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Notice of Forbearance

Par. 2.29a(5)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Compromise

3-30

September 26, 1988 M26-3

e\. [Section V - Extension and/or Reamortization]{.underline}. Report
formal extensions and reamortizations only. Temporary changes such as
modifications or suspended payments are to be reported at section IV.

[References]{.underline}

Par. 2.16
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Issuance of Deed to Purchaser

Par. 2.221
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Extensions and Reamortizations

f\. [Section VI - Change in Owner\'s Name or Address]{.underline}. Not
applicable. See paragraph 2.26a(4) regarding change of ownership.

[3.30 VA FORM 26-6822, ADVICE OF TERMINATION AND INDEBTEDNESS
ON]{.underline}

[PORTFOLIO LOANS]{.underline}

Provides advice to the Finance activity of the method of termination;
the names of all persons obligated on the indebtedness established upon
termination, if any; the amount of indebtedness owed by each; and the
basis for their liability. The portion of the form appearing above
section I is for identification purposes only. Prepared in triplicate;
original and one copy forwarded to the Finance activity; one copy
retained in loan folder.

a\. [Section I - Termination of Loan (Other Than Sale of Loan by
VA)]{.underline}. The first six items are self-explanatory. [Item
7]{.underline} is intended for use in those few cases in which the
security has such little value that liquidation is impractical, there is
little likelihood of being able to collect the debt, and VA has agreed
to accept an amount less than the total debt in full settlement. The
following subparagraphs (1) through (4) apply to [item 8]{.underline}.

\(1\) [Full Release of Liability]{.underline}. If the loan is terminated
by the acceptance of a voluntary conveyance in consideration of a
complete release of all obligors from liability, enter at this item the
total amount of the indebtedness.

\(2\) [Partial Release of Liability.]{.underline} [I]{.underline}f the
loan is terminated by acceptance of a voluntary conveyance in exchange
for a partial release from liability, enter at this item the amount of
the indebtedness released. The credit of this amount on the indebtedness
will thus indicate that the remaining balance is due and unpaid.

\(3\) [Termination of Primary Lien]{.underline}. If a primary lien is
terminated by foreclosure, enter here the gross proceeds of sale or the
current market value of the property (estimated reasonable value from
line 17 of VA Form 26-6713, less the amount of any unpaid taxes, special
assessments, ground rents, or other liens subject to which the property
will be sold), whichever is greater. Since all allowable costs and
expenses of foreclosure are charged to the borrower\'s loan account. by
the Finance activity, a credit of the amount indicated will obtain the
results prescribed in paragraph 2.29d and 38 CFR 36.4513.

3-31

M26-3 September 26, 1988

\(4\) [Termination of Junior Lien]{.underline}. If an acquired [junior
lien]{.underline} is foreclose subject to an outstanding primary lien,
enter at this primary lien, enter at this time the total acquired loan
indebtedness [provided that]{.underline} the current market value of the
property, less allowable costs and expenses of foreclosure, equals or
exceeds the combined total indebtedness of both loans. If such value is
less than the combined indebtedness, enter at this item the gross
proceeds of the foreclosure sale. As explained in subparagraph (3)
above, this will obtain the required result.

b\. [Section II - Indebtedness of Obligors Following Termination of
Loan]{.underline}. As indicated in this section, the Finance activity
will be advised of the amount and basis for liability of all persons who
are obligated on the indebtedness established.

\(1\) [Names of Persons Liable]{.underline}. Under column A, enter the
name of every person liable for any part of the indebtedness. Should any
person be liable for different amounts depending on the basis of
liability (e.g., on a direct loan a veteran may be liable by reason of
the \"overpayment of a benefit\" for one amount and liable on a
deficiency judgment obtained in connection with the liquidation for a
different amount), enter this person\'s name twice showing the separate
debts and basis for liability on each. If no debt exists, or no one is
liable for any deficiency existing, enter the word \"None\" in item 9
and leave all other items blank.

\(2\) [Amount of Indebtedness]{.underline}. Under column B enter the
amount of the indebtedness for which each person listed in the first
column is liable.

\(a\) If a voluntary conveyance has been accepted in exchange for a
complete release from liability, there will, of course, be no one
indebted for any amount, and items 9 through 14 will be left blank
except for the insertion of the word \"None\" in item 9 under column A
as indicated in subparagraph (1) above.

\(b\) If a voluntary conveyance has been accepted in exchange for a
partial release from liability, enter the amount for which each obligor
remains liable. This sum will be the amount agreed upon between VA and
the grantors as evidenced by the instrument executed by the parties.

\(c\) In cases in which a [primary lien]{.underline} is foreclosed, it
will be necessary to compute the obligor\'s indebtedness by adding to
the outstanding debt, as of the date of the foreclosure sale, the
allowable costs and expenses of foreclosure (to be determined from
copies of vouchers or certified bills in the loan folder (see par.
3.12)) and deducting therefrom the amount entered at section I, item 8,
of this form. A further deduction will be necessary in direct loan cases
for the funding fee credit provided in paragraph 2.29e. The computation
will be made by means of an informal analysis in duplicate, identifying
each allowable cost and expense. The original analysis will be retained
in the loan folder, and the duplicate will be forwarded to the Finance
activity with VA Form 26-6822.

3-32

January 28, 1992 M26-3

Change 8

\(d\) A computation similar to that set forth in subparagraph (c) above
will also be required a [junior lien]{.underline} is foreclosed by VA
subject to an outstanding primary lien.

\[(e) When the bankruptcy court permits VA\'s secured claim to be
divided into separate claims, one secured and one unsecured, the
indebtedness charged against the borrower will be the amount of the
undischarged debt remaining at loan termination (unless the
\"cram-down\" was voided through a successful appeal prior to
termination, dismissal of the bankruptcy or the granting of relief from
the automatic stay). The office of the District Counsel should be
requested to determine whether the effect of the cram-down is voided in
cases when the Chapter 13 plan is dismissed in its entirety or relief
from the automatic stay is granted on the VA loan.\]

\(3\) [Date of Action]{.underline}. Under column C enter the date the
voluntary deed was accepted, the date of the foreclosure sale, or the
date of cancellation of the installment contract, whichever is
applicable.

\(4\) [Basis of Liability]{.underline}. Under columns D to I, inclusive,
headed collectively \"Basis of Liability,\" place a check opposite the
name of each debtor in the appropriate column. [Column D]{.underline}
refers to liability resulting by reason of an \"overpayment\" of a
benefit and will be checked only if the indebtedness arose (a) from a
direct loan and the person named as being liable is a veteran whose
entitlement was used in obtaining the direct loan; or (b) from an
acquired loan to the extent of any claim paid prior to establishment of
the acquired loan account, and the person named as being liable is the
veteran whose entitlement was used in obtaining the guaranteed or
insured loan originally. [Column E]{.underline} will be checked if the
only basis for liability of the person named is on the note. [Column
F]{.underline} is intended for use in the case of persons liable (a) by
reason of the fact that they assumed liability by agreement in the deed
from their grantors, or by a separate agreement; or (b) by reason of an
agreement entered into with VA, in which they were partially released
from liability. If the person named is liable by reason of a judgment
obtained against him or her, check [column G]{.underline} and enter the
date and amount of the judgment in [columns H and I]{.underline}
respectively.

[References]{.underline}

Par. 2.29d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Advice to the Finance Activity

Par. 2.29e
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Indebtedness of Obligors Following

Termination of Portfolio Loans

Par. 3.12
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Foreclosure and Other Liquidation Expense

[3.31 VA FORM 26-6850, NOTICE OF DEFAULT]{.underline}

Self-explanatory form for the submission of notice of default by the
holders of guaranteed or insured loans and loans sold and

3-33

M26-3 January 28, 1992

Change 8

guaranteed under 38 CFR 36.4600. It shall be completed appropriately and
forwarded in due course pursuant to 38 CFR 36.4280, 36.4315, and 36.4600
and disposed of in accordance with RCS VB-1, part I, item No.
12-100.100.

[References]{.underline}

Par. 2.33a
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Default-Form

Par. 2.46c and g
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Supplemental Loan Servicing

Par. 3.06a, b, e, f and i
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Default-LCS

[3.32 VA FORM 26-6850a, NOTICE OF DEFAULT AND INTENTION TO
FORECLOSE]{.underline}

[References]{.underline}

Par. 2.33a and b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Notice of Default

Par. 3.06a, b, d, e f and
i\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Notice of Default

[3.33 VA FORM 26-6851, NOTICE OF INTENTION TO FORECLOSE]{.underline}

[Reference]{.underline}

Par. 3.06d, f and i
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Intention to Foreclose

[3.34 VA FORM 26-8753, SUPPLEMENTAL SERVICING CODE SHEET
(LCS-VADATS)]{.underline}

VA Form 26-8753 is used to code contacts with borrowers and servicers
and to record a synopsis of the contact.

[Reference]{.underline}

Par. 2.34d(2)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Telephone and Telegraph

[3.35 VA FORM 26-8778, REQUEST TO LENDER FOR STATUS OF LOAN ACCOUNT
LCS]{.underline}

VA Form 26-8778 is prepared by LCS and mailed directly to the holder or
servicer requesting advice about the present status of a loan previously
reported in default. Upon its return to the office of jurisdiction by
the servicer, VA Form 26-8778 will be coded and used as LCS input and
then filed in the related loan folder.

[References]{.underline}

Par. 2.33c
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Followup to Holder

Par. 2.46g
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Supplemental Loan Servicing

Par. 3.06i
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Followup to Servicer

Par. 3.06j
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Followup and Updating Changes

Par. 4.06b, M26-4
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Default

VA Handbook H26-82-1, pars. 4.04c and 5.03b(20)
\...\...\...\...\...\...\...\... Default Status Update

3-34

M26-3

January 28, 1992 Change 8

[3.36 VA FORM 26-8799, ACKNOWLEDGMENT]{.underline}

VA Form 26-8799 is produced by LCS to acknowledge receipt of each VA
Form 26-6850 26-6850a and 26-6851. VA Form 26-8799 is mailed directly to
the servicer or holder.

[Reference]{.underline}

Par. 3.06b,c and d
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Acknowledgment to Servicer

3-34a

January 7, 1992 M26-3

Change 7

\[ \]

[3.38 VA FORM 26-8802, FOLLOWUP ON FORECLOSURE SALE - LCS]{.underline}

VA Form 26-8802 is prepared by LCS and mailed directly to servicers
requesting the results of the foreclosure sale when the sale data has
passed and the disposition of the property is unknown. Although VA Form
26-8802 may possibly be used as a reply medium by the servicer, it is
not designed as an LCS input document.

[Reference]{.underline}

VA Handbook H26-82-1, par. 4.04c \...\...\...\...\.... Turnabout Status
Requests

[3.39 VA FORM 26-8839, LOAN GUARANTY-IRS LOCATOR CODE SHEET]{.underline}

a\. [Regional Office Procedures]{.underline}

\(1\) Request for locator assistance will be prepared in duplicate,
using VA Form 26-8839, which will be completed as follows:

\(a\) [Item 1, Date]{.underline}. Enter date of submission to DPC; e.g.,
March 1980.

\(b\) [Item 2, Page No]{.underline}. Enter numbering of pages; e.g., 1
of 1, 1 of 3.

\(c\) [Item 3, To]{.underline}. No completion necessary. (DPC address is
preprinted.)

\(d\) [Item 4, From]{.underline}. Enter name of originating station;
e.g., VARO (26), Pittsburgh.

\(e\) [Item 5, Agency Code]{.underline}. No completion necessary. (VA\'s
agency code number as assigned by IRS (Internal Revenue Service) is 855,
and the number is preprinted on the form.)

\(f\) [Item 6, Social Security No]{.underline}. Enter borrower\'s SSN.

\(g\) [Item 7, Project Code]{.underline}. No completion necessary.
(Project code number 719 is preprinted on the form.)

\(h\) [Items 8 through 11, Identification Data]{.underline}. Enter
15-digit loan identification consisting of office of jurisdiction,
office of origination, type of loan, loan number, and name code in
accordance with M26-11, paragraph 2.02.

\(i\) [Item 12, IRS Name Control]{.underline}. Enter the first 4
characters (including hyphens, if any) of the borrower\'s last name;
e.g., John Brown - BROW, John Lea-Smith - LEA-. Note special
requirements for coding of particular types of names given below.

3-35

M26-3 January 7, 1992

Change 7

[1]{.underline}. In surnames of fewer than 4 characters (or hyphens),
the remaining positions on the code sheet remain blank; e.g., John En,
Sr. - EN, Mary Doe - DOE.

[2]{.underline}. Disregard blanks or apostrophes between letters, but
include words preceding the surname such as \"Di,\" and \"de la\"; e.g.,
John O\'Neil - ONEI, John DiAngelo - DIAN.

[3]{.underline}. Do not include \[in\] the name control code certain
Spanish phrases or their abbreviations, which come before the surname.
Examples of these are:

ESP.

ESP.DE

ESPOSA DE, meaning \"wife of\"

VDA.

VDA.DE

VIUAD DE, meaning \"widow of\"

EXAMPLE: Elena Torres vda de Conto - CONT

[4]{.underline}. Do not include the small letter \"y,\" which is a
single letter between parts of the surname in the name control code;
e.g., Juan Paz y Obregon - PAZO.

[5]{.underline}. Include the mother\'s maiden name, used as a suffix to
the surname, and certain other suffixes as parts of the surname for name
control code purposes; e.g., Pedro Rey-Ayala - REY-, or Jose Paz
Alvarado - PAZA.

\(2\) The original of the completed code sheet will be mailed to the
Austin DPC (GIL 200/391B) on or before the lst day of each month. Code
sheets mailed later may not be included for that month\'s submission to
IRS.

\(3\) A duplicate copy of each VA Form 26-8839 will be retained at the
initiating station in a holder file pending the receipt of the requested
information and will be disposed of in accordance with RCS VB-1, part I,
item No. 13-007.000. Approximately 60 days will be allowed for the
return of the hard-copy output.

3-36

September 26, 1988 M26-3

\(4\) Nonreceipt of information or \"NO RECORD\" printouts will require
verification of the borrower\'s SSN and IRS Name Control and
resubmission to Austin DPC for the following month\'s run. No inquiries
concerning nonreceipt of printouts will be sent to Austin DPC.

\(5\) Upon receipt of the printouts, the name furnished will be compared
with the name in VA\'s records, and if matched, regional offices will
proceed with notification to the original borrower in accordance with
paragraph 2.23b.

b\. [Data Supplied by IRS]{.underline}. IRS will furnish a printout
reply on IRS Form 4453, Taxpayer Address, which will consist of the name
and address of the borrower according to IRS records (see fig. 1), or
will carry the legend \"\*\*\*NO RECORD SSN\*\*\*\" or \"\*\*\*NO RECORD
NC\*\*\*\" (see fig. 2) if IRS cannot identify the SSN or IRS Name
Control Code.

c\. IRS output will be printed as shown in figures 1 and 2. The various
codes and symbols used routinely are indicated in figure 1 as follows:

\(1\) [Name and Address - (Circled 1)]{.underline} - will be given as
last shown on IRS Individual Master File.

\(2\) [Name Control - (Circled 2)]{.underline} - will be shown as
provided by VA on VA Form 26-8839.

\(3\) [Social Security No]{.underline}. - (Circled 3) - will be shown as
provided by VA.

\(4\) [Agency Code - (Circled 4)]{.underline} will be 855, VA\'s Agency
Code.

\(5\) [Agency Case Control No. (Circled 5]{.underline}) - will be VA\'s
loan identification data, followed by three-letter name code of
borrower\'s surname.

d\. The SSN furnished by VA is the primary locator information used by
IRS. A validity check will be performed by IRS prior to running
inquiries against their Individual Master File. Obvious errors, for
example an alpha in the SSN field or an SSN out of the range issued,
will be screened out. Inquiries rejected at this stage will be returned
in punched card format to the regional office via Austin DPC. This will
indicate not only that the inquiry contains an error but also that it
was not processed. The error should be corrected and the request
resubmitted to IRS through Austin DPC. Both the SSN and the IRS Name
Control Code on the request must match exactly those fields on the IRS
Individual Master File. If there is no match of the SSN or the IRS Name
Control Code on the Individual Master File, \"\*\*\*NO RECORD
SSN\*\*\*\" or \"\*\*\*NO RECORD NC\*\*\*\" will appear in the place of
the taxpayer\'s name on the hardcopy output (see fig. 2).

3-37

M26-3 September 26, 1988

[References]{.underline}

Par. 2.23b
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Notice to Original Borrower and Subsequent

Obligors of Transferee\'s Default

Par.
2.34d(4)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Notice of Transferee\'s Default to Original

Borrower and Other Obligors

[3.40 VA FORM 26-8844, FINANCIAL COUNSELING STATEMENT]{.underline}

This form is to be used incident to financial counseling interviews
conducted with delinquent borrowers on GI or portfolio loans. It
provides for recording comprehensive financial information concerning
borrowers\' net income, total expenditures, net worth, suggested areas
for which expenses can be reduced or income increased, the arrangement
of a family budget, and recommendations for the terms of any
contemplated repayment agreement on the defaulted loan. It should be
completed in duplicate. The original will be placed in the related loan
folder and the copy will be furnished to the borrowers.

[References]{.underline}

Par.
2.22f\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Financial Counseling

Par.
2.34g\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Financial Counseling

[3.41 VA FORM 26-8875, DELINQUENCY NOTICE - INITIAL DEFAULT]{.underline}

VA Form 26-8875 is a PLS-generated servicing letter used to advise the
borrower that his or her loan is delinquent and to request payment
and/or contact with VA. (Produced on accrual date when the loan becomes
a reportable default.)

[Reference]{.underline}

Par.
2.20e(l)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
PLS Output

[3.42 VA FORM 26-8876, DELINQUENCY NOTICE - SERIOUS DEFAULT]{.underline}

VA Form 26-8876 is a PLS-generated servicing letter sent to the borrower
whose loan is seriously delinquent. (Produced 5 days after accrual date
when total amount due equals or exceeds four full installments.)

[Reference]{.underline}

Par.
2.20g(l)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Delinquent Loans

[3.43 VA FORM 26-8880, SOME POINTS TO REMEMBER ON HAZARD INSURANCE,
TAXES AND ASSESSMENTS ON YOUR PROPERTY]{.underline}

This form is self-explanatory. A copy goes to the borrower on VA
portfolio loans at closing or otherwise. The Austin DPC will mail out
once a year a copy of this form with VA Form 26-0530, Mortgage Loan
Payment Notice.

3-38

February 10, 1993 M26-3

Change 15

[References]{.underline}

Par.
2.26a\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Change of Ownership

Par.
3.01a\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Direct Loans

Par.
3.01b\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Vendee Accounts

Par.
3.01c\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Acquired Loans

[3.44 VA FORM 26-8893, INSTRUCTIONS FOR PURCHASER ASSUMING A GI LOAN OR
SUBSTITUTING GI LOAN ENTITLEMENT]{.underline}

VA Form 26-8893 will be included in the release of liability package in
order to facilitate proper completion of those items in the package
which are applicable to the purchaser.

[Reference]{.underline}

Par. 2.49a, 2.50a, 2.52
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Release from Liability Procedures

[3.45 VA FORM 26-8901, RECOMMENDATION TO TERMINATE PORTFOLIO
LOAN]{.underline}

This form will be prepared in triplicate when:

a\. A VA portfolio loan is referred to the office of District Counsel
for foreclosure or similar legal action.

b\. In installment contract cases, station management has determined
that referral to the office of District Counsel is unnecessary and
termination is initiated following approval of the Director or the Loan
Guaranty Officer.

[References]{.underline}

Par. 2.27e(l)
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Submission of Loan Folder to Director

or Loan Guaranty Officer

Par. 2.29a
\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Referral to the Office of District Counsel

Par.
2.29c(1)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Disposition of VA Form 26-8901

Par.
2.29c(2)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Legal Action Withdrawn

[3.46 VA FORM 26-8922, REFUNDING/EQUITY REVIEW WORKSHEET]{.underline}

VA Form 26-8922 may be used to document the loan folder that required
reviews have been performed as to the advisability of refunding or
postponement of foreclosure due to the existence of substantial equity
in the security property.

[References]{.underline}

Par.
2.38\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Refunding

Par. 2.11.1,
M26-4\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Equity in Excess of \$5,000

3-39

M26-3

Change 15 February 10, 1993

[3.47 VA FORM 26-8985, DELINQUENCY NOTICE - CONTINUED
DEFAULT]{.underline}

VA Form 26-8985 is a PLS-generated servicing letter used to advise the
borrower that his or her loan remains delinquent and to .request payment
and/or contract with VA. (Produced 5 days after accrual date when total
amount due equals or exceeds three full installments.)

[Reference]{.underline}

Par.
\[2.20g\]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
PLS Output

[3.48 VA FORM 26-8985a, DELINQUENCY NOTICE - CONTINUED DEFAULT
-]{.underline}

VA Form 26-8985a is a PLS-generated servicing letter, Spanish/English
version, used to advise the borrower that his or her loan remains
delinquent and to request payment and/or contact with VA. (Produced 5
days after accrual date when total amount due equals or exceeds three
full installments.)

[Reference]{.underline}

Par.
\[2.20g\]\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
PLS Output

[3.49 FORM LETTERS]{.underline}

The form letters listed below are used in connection with loan
management activities. However, stations are authorized to create form
letters to use in the pattern library when standardized form letters are
inappropriate. When creating pattern letters, the procedures in DVB
Supplement MP-1, part II, chapter 4 will be followed.

FL

[Number]{.underline} [Description]{.underline}

26-185a To loan closer (in duplicate), completed to include loan number,
with original of VA Forms

> 26-8880, 4-5218, Mortgage Loan Collection Card (PLACE), VA Form
> 26-0524, Important Information on Lead Paint Poisoning, and PRPS
> (Philadelphia Remittance Processing Site) return envelope. Loan closer
> will be requested to date letters, hand originals to borrower and
> return duplicate FL 26-185a for filing in the loan folder.

[References]{.underline}

\[Par.
2.06a(4)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Initial Escrow Account Statement\]

Par.
3.01\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Processing VA Portfolio Loan Records

M26-6, par.
2.44\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Payments Due

3-40

February 10, 1993 M26-3

Change 15

FL

[Number]{.underline} [Description]{.underline}

26-185b To new owner with VA Forms 4-5218, 26-8792, Transfer of
Ownership Data - Portfolio Loan,

> VA Form 26-0524, PRPS return envelope and VA Form 26-8880. Duplicate
> of FL 26-185b will be filed in the loan folder.

[Reference]{.underline}

\[Par.
2.06a(4)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Initial Escrow Account Statement\]

Par.
2.26\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Change of Ownership

26-195 To holder in acknowledgment of advice that default has been
cured.

[Reference]{.underline}

Par.
2.33c\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Status of Default Pending

26-251 To original veteran transferor of property securing guaranteed or
insured loan and

> other obligors, upon receipt of notice of default from holder.

[Reference]{.underline}

Par.
2.34d(4)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Transferee\'s Default

26-265 To original veteran transferor of property securing VA portfolio
loan and other obligors, as

> notice of transferee\'s default.

[Reference]{.underline}

Par.
2.23\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Notice of Transferee\'s Default

26-557 To veteran applying for release from liability pursuant to 38 CFR
36.4285(e), 36.4323(F), or

> 36.4508(b) setting forth VA requirements.

[References]{.underline}

Par. 2.49a and
b\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Initial Processing

Par.
3.17\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Supplement to Application for Release

3-41

M26-3 February 10, 1993

Change 15

FL

[Number]{.underline} [Description]{.underline}

26-557a To veteran applying for release from liability pursuant to 38
CFR 36.4285(e), 36.4323(F), or

> 36.4508(b) (used only by regional offices with jurisdictional
> responsibility for Massachusetts, Connecticut, Maryland, Illinois,
> Missouri, Nevada, California, and Puerto Rico).

[Reference]{.underline}

Par. 2.50a and
b\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Initial Processing

26-558 To veteran applicant for release from liability under 38 CFR
36.4285(e), 36.4323(F), or

36.4508(b) notifying him or her of rejection of his or her application.

[References]{.underline}

Pars. 2.49d and f\.... Release of Liability Procedures with Clause in
Conveyance Deed

Pars. 2.50d and f\... Release of Liability Procedures when Clause in
Conveyance Deed

Is Not Acceptable

26-558a To advise prospective assumer of rejection of veteran\'s
application for release of liability.

[References]{.underline}

Pars. 2.49d and
f\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Release of Liability Procedures

with Clause in Conveyance Deed

Pars. 2.50d and
f\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Release of Liability Procedures

when Clause in Conveyance Deed is not Acceptable

26-559 To holder of guaranteed or insured home loan requesting
information re status of loan for use

> in considering veteran\'s application for release from liability under
> 38 CFR 36.4285(e), 36.4323(F), or 36.4508(b).

[References]{.underline}

Pars. 2.49d, e, f and g\...\...\...\...\...\...\...\.... Release of
Liability Procedures with Clause in

Conveyance Deed

Pars. 2.50d, e, f and g\...\...\...\...\...\...\...\... Release of
Liability Procedures when Clause in

\...\...\....Conveyance Deed is not Acceptable

26-560 To insurance agent as notice of policies held by VA on a given
case and requesting timely

evidence of renewal and premium notice.

[Reference]{.underline}

Par.
3.01b(6)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Processing VA Portfolio Loan Records

3-42

September 26, 1988 M26-3

FL

[Number]{.underline} [Description]{.underline}

26-563 To advise the borrower of the amount necessary to pay his or her
loan in full.

[Reference]{.underline}

Par.
2.26b\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Loan Account Paid in Full

26-566 For optional use by a loan guaranty staff employee on a field
visit to notify absent homeowners

of the reason for the visit.

[References]{.underline}

Par.
2.20f\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\....
Field Servicing

Par.
2.34f\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Field Report

26-580 To furnish the borrower with information on loan in connection
with the sale of his or her

property.

[Reference]{.underline}

Par.
2.26a\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...Change
in Ownership

26-642 To vendee loan borrower advising that the borrower will be
responsible for maintaining hazard

insurance coverage.

[References]{.underline}

Par.
2.06a(3)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...
Waiver of Insurance Escrow

Par.
2.08h(4)\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\...\.....
Disposition of Certain Policies

None Suggested letter of advice to veterans regarding their (Fig. 3)
rights and responsibilities for

> mortgage payments under the Soldiers\' and Sailors\' Civil Relief Act
> of 1940, as amended, when they have reentered active military service.

[Reference]{.underline}

Par. 2.37f\...\...\...\...\...\...\...\...\...\...\...\...\... Resumed
Service Cases Advice to the Borrower

3-43