Veterans Benefits Administration Circular 26-05-7

Department of Veterans Affairs September 27, 2005

Washington, DC 20420

ADDITIONAL RELIEF FOLLOWING HURRICANES KATRINA AND RITA

1\. [PURPOSE]{.underline}: This circular expresses concern about VA home
loan borrowers affected by the enormity of Hurricanes Katrina and Rita,
and describes measures mortgagees may employ to provide relief.

2\. [DIRECT AND INDIRECT IMPACT ON BORROWERS]{.underline}: Many
borrowers were directly affected by the hurricanes, and include those
whose homes were severely damaged or destroyed by winds or flooding, the
families of those killed during hurricane landfalls, as well as those
who suffered damage or personal injury during flooding due to subsequent
levee breaks and disruptions in regular health services. Also directly
affected were those whose work environments were destroyed or severely
damaged as a result of the hurricanes and flooding. Many others have
been indirectly affected, including business partners of those in the
federally declared disaster areas announced by the Federal Emergency
Management Agency (FEMA). The impact continues to ripple throughout the
country, as evacuees travel nationwide and some family members of
evacuees bring their relatives into their own homes and attempt to
support them in these difficult times.

3\. [FORBEARANCE REQUEST]{.underline}: VA encourages holders of
guaranteed loans to extend every possible forbearance to borrowers in
distress as a result of Hurricanes Katrina and Rita. Careful counseling
with borrowers should help determine whether their difficulties are
directly or indirectly related to the hurricanes, or whether they stem
from other sources which must be addressed. VA Regulations (located in
title 38, Code of Federal Regulations, or CFR) regarding "Reapplication
of Prepayments (38 CFR 36.4310), "Advances" (38 CFR 36.4313),
"Extensions and Reamortizations" (38 CFR 36.4314), and "Supplemental
Loans" (38 CFR 36.4355) may be of assistance in appropriate cases.

4\. [MORATORIUM ON FORECLOSURES]{.underline}: Although the loan holder
is ultimately responsible for determining when to initiate foreclosure
and for completing termination action, VA has requested on its website
([www.homeloans.va.gov](http://www.homeloans.va.gov/)) that holders
establish a 90-day moratorium from the date of the disasters on
initiating new foreclosures on loans affected by the hurricanes. Since
VA is requesting this, the provisions of 38 CFR 36.4319(f) will not be
applied by VA during the moratorium to loans where VA is notified that
the moratorium is appropriate. Also, the period of the moratorium will
be considered "VA-requested forbearance" for purposes of the no-bid
avoidance provisions of 38 CFR 36.4321. The initial request applied to
loans in the federally declared disaster areas, which VA believes should
include areas declared by FEMA as eligible for public assistance as well
as those areas eligible for individual assistance. Because of the
national impact of the hurricanes, holders should ensure that all
foreclosure referrals nationwide during the moratorium are reviewed
prior to initiation, to ensure that borrowers have not been affected
significantly enough to justify delay in referral. Any questions about
impact should be discussed with the appropriate VA Regional Loan Center
(RLC).

5\. [LATE CHARGE WAIVERS]{.underline}: VA is aware that many servicers
plan to waive late charges on loans in the disaster areas, and has
encouraged all servicers to adopt such a policy. At this time, VA also
requests that servicers consider expanding the waiver of late charges
nationwide due to the ripple impact of the hurricanes as mentioned in
paragraph 2.

6\. [CREDIT AND VA REPORTING]{.underline}: In order to avoid damaging
credit records of veterans in the affected areas, many servicers have
suspended credit bureau reporting on loans in those areas. At this time
VA would encourage servicers to consider suspension of credit reporting
on borrowers nationwide who have been affected by the hurricanes.
Similarly, VA will not penalize servicers for any late default reporting
to VA caused by the hurricanes, such as direct damage to servicers
located in the disaster areas, or servicers outside the area impacted by
business partners within the disaster areas. Contact the appropriate RLC
with any questions.

7\. [ACTIVATION OF THE NATIONAL GUARD]{.underline}: Many members of the
National Guard have been called to active duty to assist in recovery
efforts and to replace active duty service members who are assisting
directly in the recovery. Those individuals may experience financial
difficulties of their own due to what could be extended tours of duty
during the disaster recovery efforts. VA encourages servicers to extend
special forbearance to National Guard members in this situation.

8\. [OTHER VETERANS' BENEFITS]{.underline}: During the course of
servicing VA-guaranteed loans, counselors may contact veterans who
appear to be in need of additional benefits. In order to help those
veterans, mortgagees may want to ensure that their staffs are aware of,
and prepared to pass on a national toll-free number for obtaining
information on veterans' benefits. The number is 1-800-827-1000. Other
benefits which may be available to eligible veterans include
compensation for service-connected disabilities, pension payments for
needy veterans, vocational counseling and employment assistance,
education assistance, and life insurance programs. Medical benefits may
also be available for many service-related conditions, including post
traumatic stress disorder.

9\. [STATION RELEASES]{.underline}: This circular will be posted on VA's
Loan Guaranty website, and RLCs, Honolulu, and San Juan will also
disseminate this information as soon as possible on their websites.
Questions may be directed to Carl Wasson at 202-273-7345.

10. [RESCISSIONS]{.underline}

> a\. Circular 26-05-5 is rescinded effective immediately.
>
> b\. This circular is rescinded January 1, 2007.

By Direction of the Under Secretary for Benefits

Keith Pedigo, Director

Loan Guaranty Service

Distribution: CO: RPC 2024

SS (26A1) FLD: VBAFS, 1 each (Reproduce and distribute based on RPC
2024)