October 2, 1995 M26-4

Change 10

[CONTENTS]{.underline}

[APPENDIX]{.underline}

[FIGURE]{.underline} [PAGE]{.underline}

1 Reissuance of Loan Guaranty Certificate App.-l

2 Estoppel Affidavit App.-2

3 Sample Promissory Note with Voluntary Conveyance App.-4

4 Analysis of Account and Claim - Manually Prepared App.-6

5 Analysis of Account and Claim - Guaranteed Loans

(Detailed) App.-7

6 SF 1034, Public Voucher for Purchases and Services

Other than Personal (Example) App.-8

7 FL 4-475, First Collection Letter to Veteran on Loan

Guaranty Debt App.-9

8 FL 4-476, First Collection Letter to Veteran on Direct Loan Debt
App.-10

\[9 Suggested Instructions to Servicers on Completion of Buydowns
App.-13\]

App.-i

April 20, 1992 M26-4

REISSUANCE OF LOAN GUARANTY CERTIFICATE

Loan No.\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Date Original
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ 199\_\_\_

Amount Original \$\_\_\_\_\_\_\_\_\_\_\_\_ % Original Loan
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Holder
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Veteran-Borrower
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Address
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

> The above described Loan Guaranty Certificate is hereby reinstated,
> subject to its original terms and conditions, and shall evidence the
> liability of the Secretary of Veterans Affairs pursuant to applicable
> regulations. (The Loan Guaranty Certificate marked "CANCELLED" is
> attached.)

Secretary of Veterans Affairs

Date \_\_\_\_\_\_\_\_\_\_\_ 199\_\_ By
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Authorized Agent

[NOTE:]{.underline} NO FORM WILL BE PROVIDED OR REPRODUCED FOR THIS
PURPOSE.

Figure 1. Reissuance of Loan Guaranty Certificate

**App. -1**

M26-4 April 20, 1992

ESTOPPEL AFFIDAVIT

THIS AFFIDAVIT, Made this \_\_ day of , 19\_\_, by and hereinafter
referred to as Grantors,

WITNESSETH:

That the Grantors did, on the day of \_\_\_\_\_\_\_\_, 19\_\_, execute
and deliver a certain promissory note (bond) in the principal sum of
\$\_\_\_\_\_\_\_ and secured by a mortgage (Deed of Trust, Trust Deed)
dated \_\_\_\_\_\_ and duly recorded in the Recorder\'s Office of
County, \_\_\_\_\_\_\_\_\_\_\_\_ , in Book \_\_\_\_\_\_\_\_\_\_\_\_ ,
page \_\_\_\_\_\_\_\_\_

(State)

covering the real estate located at \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
, County\_\_\_\_\_\_\_\_\_ and

(Street address and City) (State)

more particularly described as follows:

The Grantors have defaulted in the payments due on said note upon which
the amount

of \$\_\_\_, is at present due and outstanding as of , and are unable to
meet

(date)

the obligations of said note and mortgage (Deed of Trust, Trust Deed)
according to

the terms thereof.

That the said Grantors are the parties who made, executed, and delivered
that certain deed to , dated the day of 19 ,

(Grantee)

conveying the above described property. The said Grantors hereby
acknowledge, agree, and certify that the aforesaid deed was an absolute
conveyance of the Grantor\'s rights. title, and interest in and to said
real estate, together with an buildings thereon and appurtenances
thereunto belonging and appertaining, and with release of all dower and
homestead rights in and to said real estate, and also convey. transfer,
and assign the Grantor\'s rights of possession. rentals, and equity of
redemption in and to said premises. The value of said real estate is not
in excess of the amount of said indebtedness outstanding and in
consideration of the premises hereof and in consideration of such
conveyance, the Grantors have received a full and complete

Figure 2. Estoppel Affidavit

App.-2

April 20, 1992 M26-4

release of personal liability an aid note together with the cancellation
of record by said Grantee and the delivery to the affiant of the note
(bond) secured by said mortgage (Deed of Trust, Trust Dead) duly
canceled, receipt of which canceled note (bond) is hereby acknowledged.

Said Deed was given voluntarily by the Grantors to the Grantee, in good
faith on the part of Grantors and Grantee. without any fraud.
misrepresentation, duress, or undue influence whatsoever, or any
misunderstanding on the part of Grantors or Grantee and was not given as
a preference against any other creditors of said Grantors. Said Deed of
conveyance shall not restrict the-right of the Grantee to institute
foreclosure proceedings if the Grantee desires. but the conveyance by
said Deed shall be and is hereby intended and understood to be an
absolute conveyance and an unconditional sale. with full extinguishment
of Grantors\' equity of redemption, and with full release of all
Grantors\' rights, title, and interest of every character in and to said
property.

This affidavit has been made for the protection and benefit of the
aforesaid Grantee in said Deed, his successors and assigns, and an other
parties hereafter dealing with or who may acquire an interest in the
property described therein, and shall bind the respective heirs,
executives, administrators, and assigns of the undersigned.

Subscribed and sworn to before me

this day of 19

Notary Public

(Add appropriate acknowledgment completing notarial certificate.)

NOTE: This affidavit will be individually typed.

Figure 2\--Continued. Estoppel Affidavit

App.-3

M26-4 April 20, 1992

AGREEMENT

This agreement is entered into this
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_199\_\_ by and between the Secretary
of Veterans Affairs and (Mortgagors).

[WHEREAS]{.underline}; the Mortgagors are unable to maintain their
obligation to

[,]{.underline}as required under the note and dated and secured by
property located at \[where the Secretary is guarantor of the
indebtedness;\]

[WHEREAS;]{.underline} the Mortgagors\' total obligation under the loan
instruments, including expenses allowable under the instruments and
pertinent VA regulations is estimated to be \$ as of ;

[WHEREAS;]{.underline} the property has been appraised by an independent
appraiser and its net value to the Government is determined to be
[;]{.underline}

[WHEREAS;]{.underline} the holder of the loan intends to foreclose on
the above cited loan, and if foreclosure were to be completed on or
about the approximate debt at foreclosure would be \$ ;

[WHEREAS;]{.underline} the Secretary is guarantor of the indebtedness
and, as such, would be liable under the loan guaranty to pay a claim for
the amounts of such debt which would remain unsatisfied after crediting
the loan with the property\'s net value; and, the Mortgagors would be
liable to VA for such payment pursuant to either a deficiency action or
the indemnity obligation incurred under this loan;

[WHEREAS;]{.underline} the estimated amount of such debt is now ; and,

[WHEREAS;]{.underline} the debtors desire to avoid foreclosure of the
loan with the consequences of possible adverse effects upon their credit
record.

[NOW, THEREFORE;]{.underline} the Secretary as guarantor of the
obligation and the Mortgagors agree that it would be in the best
interest of all parties concerned for VA to consent to termination of
this loan through the acceptance of a deed in lieu of foreclosure.

[ACCORDINGLY;]{.underline} in consideration for the Mortgagor\'s
surrendering any rights of title to the security herein identified, such
as, but not limited to, any right of redemption available under local
law; the use and occupancy of the property after ; and, \$ to be paid to
the Secretary by the Mortgagors \[on demand made by the Secretary\];
\[in accordance with the terms of the note executed on \];

Figure 3. Sample Promissory Note with Voluntary Conveyance

App.-4

April 20, 1992 M26-4

The Secretary agrees that, this loan will be terminated by means of a
deed in lieu of foreclosure; the balance of the loan to the lender
unpaid after crediting the debt with the net value of the property shall
be satisfied by VA; and, compliance with the terms of this agreement
shall be deemed to have satisfied the Mortgagor\'s obligation to
indemnify the Secretary for the amount of any claim paid or payable as a
result of the Government\'s guaranty of this loan for purposes of debt
collection only. Pursuant to existing statute the veteran\'s loan
guaranty entitlement may be restored only when the outstanding
obligation created under this agreement is paid in full.

This agreement shall be governed by the laws of the United States.

Secretary of Veterans Affairs

[.]{.underline}

(Mortgagors) Loan Guaranty Officer pursuant

to the authority granted by 38 CFR

36.4342

Figure 3\--Continued. Sample Promissory Note

with Voluntary Conveyance

App.-5

**M26-4**

**MANUAL ANALYSIS OF ACCOUNT AND CLAIM**

  -------------------- ------------- -------- -------------- -----------------
  ORIGINAL LOAN AMOUNT \$42,000.00            VA LOAN NO:    01 01 2 0123456

  PERCENT OF GUARANTY  50.00                  VETERAN        DOE, John A.

  TERM OF LOAN         360 MO                                

  INTEREST RATE        13.000                                

  P & I AMOUNT         \$464.60               HOLDERS LOAN   23456789-8-01
                                              #:             

  DATE INTEREST BEGINS 03/05/90               HOLDER:        FNMA

  DATE OF FIRST        04/10/90               ADDRESS:       c/o American
  PAYMENT                                                    Security

  DEFAULT DATE         05/01/90                              P.O. Box 35022

  FC SALE DATE         10/13/90                              Washington, DC
                                                             20013

  CUTOFF DATE          10/13/90                              

  CUTOFF TYPE: FC                                            
  -------------------- ------------- -------- -------------- -----------------

+--------------------------------+--------+--------+--------+--------+
| ITEM                           | AMOUNT | IN     | PRIN   | PRIN   |
|                                |        | TEREST |        | BAL    |
| \(A\)                          | \(B\)  |        | \(D\)  |        |
|                                |        | \(C\)  |        | \(E\)  |
+--------------------------------+--------+--------+--------+--------+

  --------------------------------- -------------------------- -------------------- ------------------------ ----------------------
  [SECTION A - ACCOUNT]{.underline}                                                                          

  1\. ORIGINAL PRINCIPAL            \$42,000                                                                 \$42,000.00

  2\. INT. ADJUSTMENT DR(+)/CR (-)                             -\$59.84                                      

  3\. 2 PAYMENTS MADE               \$929.20                   909.89               \$19.31                  

  4\. OBLIGOR PREPAYMENTS                                      \_\_\_\_\_\_\_\_\_   [-0 -   ]{.underline}    \_\_\_\_\_\_\_\_\_\_

  5\. TOTAL                                                    \$850.05             \$19.31                  \$41,980.69

                                                                                                             

  [SECTION B -                                                                                               
  INTEREST]{.underline}                                                                                      

  6\. ACCRUED INTEREST ON                                                                                    
  \$41,980.69                                                                                                

  FROM 03/01/80 TO 10/13/80 165                                \$2,467.08                                    
  DAYS                                                                                                       

  7\. ADVANCES TO CUTOFF            \$50.00                                                                  \$42,030.69

  8\. ACCRUED INTEREST ON                                      [1.07]{.underline}                            
  ADVANCE(s)                                                                                                 

  9\. INTEREST DUE FROM VETERAN                                \$2,468.15                                    

                                                                                                             

  [SECTION C -                                                                                               
  CLAIM/SETTLEMENT]{.underline}                                                                              

  10\. PRINCIPAL & INTEREST DUE:                                                                             \$44,498.84

  11\. ESCROW/CREDIT BALANCE:       -\$110.76                                                                

  12\. LIQUIDATION EXPENSES PRIOR                                                   \$250.00                 \$44,638.08
  TO CUTOFF                                                                                                  

  13\. MAXIMUM GUARANTY AMOUNT      \$21,000                                                                 

  14\. ACCRUED INTEREST ON          \$41,919.93                                                              

  FROM 10/13/80 TO 11/04/80 22 DAYS                            \$328.47                                      

  15\. ADVANCE(s) ON OR AFTER                                                       71.89                    
  CUTOFF                                                                                                     

  16\. LIQUIDATION EXPENSES ON OR                                                   [\$489.00]{.underline}   
  AFTER CUTOFF                                                                                               

  17\. TOTAL INDEBTEDNESS                                                                                    \$45,527.44

  18\. PROCEDDS OF SALE             -\$40,000.00                                                             

  19\. NET AMOUNT OF CLAIM PAYABLE  [\$5,527.44]{.underline}                                                 

  20\. OTHER DEBITS (+)             \$ -0-                                                                   

  21\. OTHER CREDITS (-)            \- 59.84                                                                 

  22\. NET AMOUNT OF CLAIM PAYABLE                                                                           \$5,467.60
  --------------------------------- -------------------------- -------------------- ------------------------ ----------------------

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Reviewed by:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Checked by:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Payee is Entitled to Payment Described Herein. 36X4025 \$5,467.60

Date: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ Signature:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Title:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Figure 4. Analysis of Account and Claim - Manually Prepared

**App. -6**

April 20, 1992 M26-4

**ANALYSIS OF ACCOUNT AND CLAIMS**

> LENDER: The First National Bank, Washington, D.C.
>
> VETERAN: DOE, John
>
> LOAN NO: LHG 0000 DC

ACCOUNT

  ------- ------- -------------------- ------------- ------------------------- ----------- -------------
                                       1             2                         3           4

          1990                         Amount        Interest                  Principal   Prin Balance

  \*1.    Mar. 15 Original Principal   \$20,000.00                                         \$20,000.00
                  (60% Gty - \$12,000)                                                     

  2\.     May 12  Payment              133.20        \$116.60                  \$16.60     19,983.40

  3\.     May 28  Payment              133.20        116.60                    16.60       19,966.80

  4\.     June 4  Payment              133.20        116.40                    16.80       19,950.00

  5\.     July 10 Payment              133.20        116.40                    16.80       19,933.20

  6\.     Aug. 9  Payment              133.20        116.20                    17.00       19,916.20

  7\.     Sept.   Payment              133.20        116.20                    17.00       19,899.20
          15                                                                               

  8\.     Oct. 19 Payment              133.20        116.00                    17.20       19,882.00

  9\.     Nov 15. Payment              133.20        116.00                    17.20       19,864.80

  10\.    Dec. 7  Payment              133.20        115.80                    17.40       19,847.40

          1970                                                                             

  11\.    Jan. 5  Payment              133.20        115.80                    17.40       19,830.00

  12\.    Apr. 8  Payment              133.20        115.60                    17.60       19,812.40

  13\.    Apr. 17 Payment              133.20        [115.60   ]{.underline}   17.60       19,794.80

  \*14.   Oct. 7  Total                              \$1,393.20                            \$19,794.80
  ------- ------- -------------------- ------------- ------------------------- ----------- -------------

INTEREST (365 day basis - 7%)

  ------ ------- ------------------------------ ------------------------- -------------------------
         1990                                                             

  15\.   May 12  Accrued Int. - Mar. 15 - date  \$222.47                  
                 (58 days - \$20,000.00)                                  

  16\.   May 28  Accrued Int. - May 12 - date   61.32                     
                 (16 days - 19,983.40)                                    

  17\.   June 4  Accrued Int. - May 28 - date ( 26.81                     
                 7 days - 19,966.80)                                      

  18\.   July 10 Accrued Int. - June 4 - date   137.74                    
                 (36 days - 19,950.00)                                    

  19\.   Aug. 9  Accrued Int. - July 10 - date  114.68                    
                 (30 days - 19,933.20)                                    

  20\.   Sept.   Accrued Int. - Aug. 9 - date   141.32                    
         15      (37 days - 19,916.20)                                    

  21\.   Oct. 19 Accrued Int. - Sept. 15 - date 129.75                    
                 (34 days - 19,899.20)                                    

  22\.   Nov 15. Accrued Int. - Oct. 19 - date  102.95                    
                 (27 days - 19,882.00)                                    

  23\.   Dec. 7  Accrued Int. - Nov. 15 - date  83.81                     
                 (22 days - 19,864.80)                                    

         1970                                                             

  24\.   Jan. 5  Accrued Int. - Dec. 7 - date   110.38                    
                 (29 days - 19,847.40)                                    

  25\.   Apr. 8  Accrued Int. - Jan. 5 - date   353.68                    
                 (93 days - 19,830.00)                                    

  26\.   Apr. 17 Accrued Int. - Apr. 8 - date ( 34.20                     
                 9 days - 19,812.40)                                      

  27\.   Oct. 7  Accrued Int. -Apr. 17 - date   [656.75  ]{.underline}    
                 (173 days - 19,794.80)                                   

  28\.   Oct. 7  Total accrued interest payable \$2,175.86                
                 by veteran                                               

  29\.   Oct. 7  Total accrued interest paid    [1,393.20 ]{.underline}   \$1,393.20

  30\.   Oct. 7  Interest due from veteran      \$ 782.66                 [782.66   ]{.underline}

  31\.   Oct. 7  Total interest paid and unpaid                           \$2,175.86
  ------ ------- ------------------------------ ------------------------- -------------------------

CLAIM

  ------ ------- ------------------------------------------------- -------------------------
  32\.   Oct. 7  Unpaid principal balance (column 4, line 14)      \$19,794.80

  33\.   Oct. 7  Interest due from veteran (line 30)               [782.66   ]{.underline}

  34\.   Oct. 7  Veteran's total indebtedness                      \$20,577.46

  35\.   Oct. 7  Claim: \$12,000.00 (maximum guaranty)             
  ------ ------- ------------------------------------------------- -------------------------

SETTLEMENT

  ------- ------- ---------------------------------------- ----------------------- --------------------------
  36\.    Oct. 7  Balance unpaid principal (line 32)                               \$19,794.80

  37\.    Oct. 7  Interest due from veteran (line 33)                              [782.66  ]{.underline}

  38\.    Oct. 7  Total                                                            \$20,577.46

  \*39.   Dec. 13 Accrued Interest - Oct. 7 - date (67                             254.35
                  days \$19,794.80)                                                

  40\.    Dec. 13 Taxes - 2^nd^ half 1970)                                         350.00

  41\.    Dec. 13 Sales advertising costs                  \$ 65.50                

  42\.    Dec. 13 Attorney's fees                          125.00                  

  43\.    Dec. 13 Court costs                              [30.00  ]{.underline}   

  44\.    Dec. 13 Total expense of sale                                            [220.50 ]{.underline}

  45\.    Dec. 13 Total indebtedness at date of sale                               \$21,402.31

  46\.    Dec. 13 Gross proceeds from sale                                         [19,000.00 ]{.underline}

  47\.    Dec. 13 Net amount of claim                                              \$ 2,402.31
  ------- ------- ---------------------------------------- ----------------------- --------------------------

\*1 Date of final disbursement

\*34 Cutoff date under VA Regulation 4321 (A)

\*39 Date of sale or confirmation of sale

Figure 5. Analysis of Account and Claim - Guaranteed Loans (Detailed)

**App.-7**

M26-4 April 20, 1992

<table style="width:100%;">
<colgroup>
<col style="width: 9%" />
<col style="width: 3%" />
<col style="width: 1%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 2%" />
<col style="width: 17%" />
<col style="width: 4%" />
<col style="width: 1%" />
<col style="width: 1%" />
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 4%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 1%" />
<col style="width: 4%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 6%" />
<col style="width: 0%" />
<col style="width: 3%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="4"><p>Standard Form 1034</p>
<p>September 1973</p>
<p>4 Treasury FRM 2000</p>
<p>1034-115</p></td>
<td colspan="17"><p><strong>PUBLIC VOUCHER FOR PURCHASES
AND</strong></p>
<p><strong>SERVICES OTHER THAN PERSONAL</strong></p></td>
<td colspan="6">VOUCHER NO.</td>
</tr>
<tr class="even">
<td colspan="8">U.S. DEPARTMENT, BUREAU OF ESTABLISHMENT AND
LOCATION</td>
<td colspan="11"><p>DATE VOUCHERED PREPARED</p>
<p>11/1/89</p></td>
<td colspan="8">SCHEDULE NO.</td>
</tr>
<tr class="odd">
<td colspan="8">Department of Veterans Affairs</td>
<td colspan="11">CONTRACT NUMBER AND DATE</td>
<td colspan="8"><strong>PAID BY</strong></td>
</tr>
<tr class="even">
<td colspan="8">Regional Office (325)</td>
<td colspan="11">REQUISITION NUMBER AND DATE</td>
<td colspan="8"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="15"></td>
<td colspan="10"></td>
</tr>
<tr class="even">
<td colspan="2"><strong>PAYEE’S</strong></td>
<td colspan="15"><blockquote>
<p>James Blank</p>
</blockquote></td>
<td colspan="10"></td>
</tr>
<tr class="odd">
<td colspan="2"><strong>NAME</strong></td>
<td colspan="15"><blockquote>
<p>U.S. Marshall</p>
</blockquote></td>
<td colspan="10">DATE INVOICE RECEIVED</td>
</tr>
<tr class="even">
<td colspan="2"><strong>AND</strong></td>
<td colspan="15"><blockquote>
<p>Court House</p>
</blockquote></td>
<td colspan="10"></td>
</tr>
<tr class="odd">
<td colspan="2"><strong>ADDRESS</strong></td>
<td colspan="15"><blockquote>
<p>Cleveland, OH</p>
</blockquote></td>
<td colspan="10">DISCOUNT TERMS</td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="15"></td>
<td colspan="10"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="15"></td>
<td colspan="10">PAYEE’S ACCOUNT NUMBER</td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="15"></td>
<td colspan="10"></td>
</tr>
<tr class="odd">
<td colspan="5">SHIPPED FROM</td>
<td colspan="4">TO</td>
<td colspan="9">WEIGHT</td>
<td colspan="9">GOVERNMENT B/L NUMBER</td>
</tr>
<tr class="even">
<td colspan="5"></td>
<td colspan="4"></td>
<td colspan="9"></td>
<td colspan="9"></td>
</tr>
<tr class="odd">
<td>NUMBER AND DATE OF ORDER</td>
<td colspan="5">DATE OF DELIVERY OR SERVICE</td>
<td colspan="6"><p>ARTICLES OF SERVICES</p>
<p>(Enter description, item number of contract or Federal supply
schedule, and other information deemed necessary)</p></td>
<td colspan="4">QUAN- TITY</td>
<td colspan="7"><p>UNIT PRICE</p>
<p>COST PER</p></td>
<td colspan="4"><p>AMOUNT</p>
<p>(<a href="#fn1" class="footnote-ref" id="fnref1"
role="doc-noteref"><sup>1</sup></a> )</p></td>
</tr>
<tr class="even">
<td></td>
<td colspan="5"></td>
<td colspan="6"><p>Foreclosure sale of home, 100 high Street, Cleveland,
OH</p>
<p>Veteran: John Doe AS 12345678</p>
<p>Lender: Acme Bank, Cleveland, OH</p>
<p>Loan No.: LH 5 OH</p>
<blockquote>
<p>Date</p>
<p>Time</p>
<p>Place</p>
</blockquote>
<p>MAIL CHECKS TO: Richard Roe</p>
<p>1000 First Ave., Cleveland, OH</p></td>
<td colspan="4"></td>
<td colspan="4"></td>
<td colspan="2"></td>
<td colspan="5">3,000.00</td>
</tr>
<tr class="odd">
<td colspan="24">(Use continuation sheet(s) if necessary) <strong>(Payee
must NOT use the space below) TOTAL</strong></td>
<td colspan="3">3,000.00</td>
</tr>
<tr class="even">
<td colspan="3">PAYMENT:</td>
<td colspan="4">APPROVED FOR</td>
<td colspan="7">EXCHANGE RATE</td>
<td colspan="12">DIFFERENCES __________</td>
<td></td>
</tr>
<tr class="odd">
<td colspan="3">COMPLETE</td>
<td colspan="4">=$3,000.00</td>
<td colspan="6">=$1.00</td>
<td colspan="12"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="3">PARTIAL</td>
<td colspan="10">BY<a href="#fn2" class="footnote-ref" id="fnref2"
role="doc-noteref"><sup>2</sup></a></td>
<td colspan="12"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="3">FINAL</td>
<td colspan="10"></td>
<td colspan="12"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="3">PROGRESS</td>
<td colspan="10">TITLE</td>
<td colspan="12">Amount verified; correct for</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="3">ADVANCE</td>
<td colspan="10"></td>
<td colspan="12">(<em>Signature or initials</em>)</td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="27"><p>Pursuant to authority vested in me, I certify that
this voucher is correct and proper for payment.</p>
<p>________________ ____________________________________________________
_________________________________________</p>
<p>(Date) (Authorized Certifying Official) <a href="#fn3"
class="footnote-ref" id="fnref3" role="doc-noteref"><sup>3</sup></a>
(Title)</p></td>
</tr>
<tr class="odd">
<td colspan="27">ACCOUNTING CLASSIFICATION</td>
</tr>
<tr class="even">
<td colspan="10"><p>Appropriation, limitation, or</p>
<p>project symbol</p>
<p>36X4025</p>
<p>Allotment symbol</p></td>
<td colspan="17"><p>Appropriation</p>
<p>Amount</p>
<p>3,000.00</p></td>
</tr>
<tr class="odd">
<td><strong>PAID</strong></td>
<td colspan="10">CHECK NUMBER ON TREASURER OF THE UNITED STATES</td>
<td colspan="16">CHECK NUMBER ON (Name of bank)</td>
</tr>
<tr class="even">
<td><strong>BY</strong></td>
<td colspan="10">CASH DATE</td>
<td colspan="16">PAYEE<a href="#fn4" class="footnote-ref" id="fnref4"
role="doc-noteref"><sup>4</sup></a></td>
</tr>
<tr class="odd">
<td colspan="15"><p><sup>1</sup> When stated in foreign currency, insert
name of currency</p>
<p><sup>2</sup> If the ability to certify and authority to approve are
combined in one person, one signature only is necessary, otherwise the
approving officer will sign in the space provided, over his official
title.</p></td>
<td colspan="12">PER</td>
</tr>
<tr class="even">
<td colspan="15"><sup>3</sup> When a voucher is receipted in the name of
a company or corporation, the name of the person writing the company or
corporate name, as well as the capacity in which he signs, must appear.
For example: “John Doe Company, per John Smith, Secretary”, as the case
may be.</td>
<td colspan="12">TITLE</td>
</tr>
</tbody>
</table>
<aside id="footnotes" class="footnotes footnotes-end-of-document"
role="doc-endnotes">
<hr />
<ol>
<li id="fn1"><p><sup>1</sup> When stated in foreign currency, insert
name of currency<a href="#fnref1" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
<li id="fn2"><p><sup>2</sup> If the ability to certify and authority to
approve are combined in one person, one signature only is necessary,
otherwise the approving officer will sign in the space provided, over
his official title.<a href="#fnref2" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
<li id="fn3"><p><sup>2</sup> If the ability to certify and authority to
approve are combined in one person, one signature only is necessary,
otherwise the approving officer will sign in the space provided, over
his official title.<a href="#fnref3" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
<li id="fn4"><p><sup>3</sup> When a voucher is receipted in the name of
a company or corporation, the name of the person writing the company or
corporate name, as well as the capacity in which he signs, must appear.
For example: “John Doe Company, per John Smith, Secretary”, as the case
may be.<a href="#fnref4" class="footnote-back"
role="doc-backlink">↩︎</a></p></li>
</ol>
</aside>

Figure 6. SF 1034, Public Voucher for Purchases and

Services Other Than Personal (Example)

App.-8

November 19, 1992 M26-4

Change 3

Debt Management Center Bishop Henry Whipple Federal Building

P.O. Box 11930

St Paul, MN 55111

You are indebted to the United States for \$ plus interest Since you did
not make

payments as You agreed, the Department of Veterans Affairs was required
under the home loan guaranty program to pay a claim on your behalf to
the holder of the home loan who foreclosed the loan secured by the
property at:

This is a debt owed by you to the United States Government Debts being
repaid by installments will continue to be charged interest If full
payment of the debt is made, any future benefit payments due you will
not be withheld.

NOTICE OF RIGHTS: If you do not believe you owe this debt or you think
the amount is correct, you have the right to dispute the debt. You also
have the right to request a waiver of the debt and the right to an oral
hearing on the waiver request A waiver of the debt may not be granted
however, if there were fraud. misrepresentation or bad faith on your
part in connection with the establishment of this debt.

Your benefit payment % if any, are subject to withholding union you
notify this office in writing, within 30 days from the date of this
letter that you want to dispute the existence or amount of the debt or
request a waiver. You may do both in the same letter if you wish. You
may have an oral bearing in connection with your waiver request before a
waiver decision is made if you request the bearing within the 30-day
period. Additional [information concerning these rights is provided on
the]{.underline} [back of this letter]{.underline}. [Please]{.underline}
read it [carefully]{.underline}.

REPAYMENT PLAN: Regardless of whether you dispute the debt or request
waiver, you may contact us to work out a mutually satisfactory repayment
plan if repayment in full would cause a hardship. Note that any future
benefit payments to which you may become entitled may be withheld in
lieu of any repay­ment agreement.

Checks or money orders should be made payable to the Department of
Veterans Affairs and returned in the enclosed envelope along with the
bottom portion of this letter. Please include your full mm and file
number on your check or money order to insure proper credit.

[You may]{.underline} [contact us at the following toll-free telephone
number if you have any question concerning]{.underline} [this letter or
to make arrangements to repay your debt: 1-800-827-0648]{.underline}

Chief of Operations, Debt Management Center

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

FOR PROPER CREDIT TO YOUR ACCOUNT, PLEASE DETACH AND RETURN WITH YOUR
PAYMENT

  ------------------------------- ---------------------------------------
                                  **PAYMENT REMITTANCE**

  ------------------------------- ---------------------------------------

+------------+-------+--------------+---------------------------------+
| \* FILE    |       | AMOUNT       | ENTER YOUR CURRENT ADDRESS      |
| NO.        |       | ENCLOSED     | BELOW ONLY IF THE               |
+------------+-------+--------------+---------------------------------+
| PAYEE NO.  |       | \$           | ONE ABOVE IS INCORRECT. PLEASE  |
|            |       |              | INCLUDE YOUR ZIP                |
|            |       |              |                                 |
|            |       |              | CODE                            |
+------------+-------+--------------+---------------------------------+
| PERSON     |       | YOUR         |                                 |
| ENTITLED   |       | TELEPHONE    |                                 |
|            |       | NO.          |                                 |
+------------+-------+--------------+---------------------------------+
| DEDUCTION  |       | (INCLUDING   |                                 |
| CODE       |       | AREA CODE)   |                                 |
+------------+-------+--------------+---------------------------------+
|            |       |              |                                 |
+------------+-------+--------------+---------------------------------+
| \* Please  |       |              |                                 |
| include    |       |              |                                 |
| this       |       |              |                                 |
| number on  |       |              |                                 |
| your check |       |              |                                 |
| or money   |       |              |                                 |
| order      |       |              |                                 |
+------------+-------+--------------+---------------------------------+

FL 4-475, JUL 1992

Figure 7. Form Letter 4-475, First Collection Letter

on Loan Guaranty Debt

App.-9

M26-4 November 19, 1992

Change 3

[NOTICE OF RIGHTS AND OBLIGATIONS]{.underline}

DEBTS OWED THE UNITED STATES GOVERNMENT: The law requires the Department
of Veterans Affairs (VA) to collect debts owed the government by reason
of participation in VA benefit programs. When the individual remains
entitled to benefits, VA is required to collect the debt by withholding
current or future benefits until the debt is paid, except as explained
below. If the individual is a current or retired federal employee the
debt may be referred for computer matching for the purpose of federal
salary offset or retirement pay offset. Any current or future VA benefit
payments, federal salary, lump sum or retirement payments. insurance
dividends, or other payments made under any law administered by VA may
be withheld.

NOTE: Whenever this letter states that you have a period of time to take
some action or to notify us, the period of time begins to run from the
date appearing on the front of this letter.

RIGHT TO DISPUTE THE EXISTENCE OR AMOUNT OF THE DEBT: If you tell us in
writing within 30 days that you believe that you do not owe this debt or
that the amount is incorrect, we will not withhold your future benefit
payments (if any) as scheduled until we confirm that you were overpaid
and the amount is correct or we determine that the delay required to
resolve the dispute will jeopardize our ability to collect the full
amount of the debt. You should explain, to the extent you can, why you
believe you do not owe the debt or why the amount is incorrect. A
determination on the dispute of a debt which is unfavorable to you will
not affect your right to appeal the decision underlying the debt to the
Board of Veterans Appeals.

RIGHT TO REQUEST WAIVER OF THE DEBT: Under certain circumstances. we can
grant a request to waive part or all of the debt. This means that you
will not be required to pay the amount waived. Since you received this
letter by certified mail, you have one year from the date the certified
mail receipt was signed to request a waiver.

Your waiver request must be submitted to us in writing. It should
explain any responsibility you may have had in causing the debt or why
you were not responsible for it, any undue financial hardship which
would be caused by collection of the amount owed, and any other
circumstances which you believe would show that collection of the debt
would be inequitable to you. If you request a waiver, we will ask you
for financial information to determine hardship.

NOTE: You can dispute the debt and request waiver in the same letter if
you wish. A VA service representative at your nearest VA regional office
will assist you with the preparation of this written notification.

EFFECT OF WAIVER REQUEST ON WITHHOLDING OF BENEFITS: If we receive your
waiver request within 30 days from the date of this letter, we will not
begin to withhold any VA benefits to which you may be entitled unless
your request is denied. If your waiver request is not received within 30
days, we will begin with­holding your benefits (if any) as explained on
the front of this letter, and the withholding will continue during our
consideration of your waiver request. If a waiver is subsequently
granted, any withhold amount which is waived will be refunded.

ORAL HEARING ON WAIVER REQUEST: You may request an oral hearing to
present evidence or argument on any point in connection with your waiver
request. If you desire a hearing, you should request it at the same time
that you submit your written request for waiver so that we can schedule
a hearing before any decision is made. If you do not request an oral
hearing on your waiver request within 30 days, we may make a waiver
decision without first holding a hearing. We will notify you of the
date, time, and place of the requested hearing. You may bring witnesses
and all testimony will be entered into the record. VA will furnish a
hearing room, provide hearing officials, and prepare a written
transcript of the proceeding. VA cannot bear any other expense of the
hearing.

NOTE: A waiver of a Loan Guaranty or Direct Loan indebtedness will not
restore the entitlement used. If the loan is defaulted and the VA incurs
a loss on such loan. the loss must be paid in full to restore previously
used entitlement. [Further, you are]{.underline} reminded that a
discharge of indebtedness. such as a waiver, may be considered
[taxable]{.underline} income and may be reportable by you to the
Internal Revenue Service (IRS). A report of any waiver granted may be
provided by VA to the IRS in accordance with IRS regulations.

ADMINISTRATIVE COSTS OF COLLECTION CHARGES: (Applies only if specified
on the front of this letter.) The monthly administrative cost of
collection fee will not be added to your debt if, within 30 days full
payment of the debt is received or an acceptable repayment plan is
worked out. If an installment repayment plan is worked out and any
installment is not received by the due date, the monthly administrative
cost of collection fee will thereafter be charged for the life of the
debt. Other costs of collection may also be added to the debt if
add­itional collection actions become necessary.

REPRESENTATION: You may be represented, without charge, by an accredited
representative of a veterans\' organization or other service
organization recognized by the Secretary of Veterans Affairs You may
employ an attorney to assist you, for example, an attorney in private
practice or a legal aid attorney. The services of an attorney
representing you in adjudicatory proceedings before VA are subject to a
fee limitation as set forth in 38 U.S.C. 5904. If you desire
representation and have not already designated a representative, let us
know and we will send you the necessary forms.

Figure 7\--Continued. Form Letter 4-475, First Collection Letter

on Loan Guaranty Debt

App.-10

M26-4

November 19, 1992 Change 3

Debt Management Center Bishop Henry Whipple Federal Building

P.O. Box 11930

St Paul, MN 55111

The Department of Veterans Affairs was required to terminate your direct
home loan because payments were not made as agreed. As a result of
foreclosure, the VA sustained a loss of \$ As of the date of this
letter. your indebtedness is \$ , plus interest. This is debt owed by
you to the United States Government Debts being repaid by installments
will continue to be charged interest If full payment of the debt is
made, any future benefit payments due you will not be withheld.

NOTICE OF RIGHTS: If you do not believe you owe this debt or think the
amount is incorrect. you have the right to dispute the debt You also
have the right to request a waiver of the debt and the right to an oral
hearing on the waiver request. A waiver of the debt may not be granted.
however. if there were fraud, misrepresentation or bad faith on your
part in connection with the establishment of this debt.

If you am currently receiving benefit payments, they are subject to
withholding unless you notify this office. in writing, within 30 days
from the date of this letter that you wish to dispute the existence or
amount of the debt or request a waiver. You may do both in the same
letter. You may have an oral hear­ing in connection with your waiver
request before a waiver decision is made if your the bearing with­in the
30-day period. [Additional information concerning these rights is
provided on the back of this]{.underline} [Please read]{.underline} it
carefully.

[REPAYMENT PLAN:]{.underline} Regardless of whether you dispute the debt
or request waiver, you may contact us to work out a mutually
satisfactory repayment plan if repayment in full would cause hardship.
Note that any future benefit payments to which you may become entitled
may be withhold in lieu of any repayment agreement.

Checks or money orders should be made payable to the of Veterans Affairs
and returned in

the enclosed envelope along with the bottom portion of this letter.
Please include your full name and file number on your check or money
order to receive proper credit

[You may]{.underline} contact us at the [following
toll-free]{.underline} telephone number [if you have any questions
concerning this letter or to make arrangements to repay your debt:
1-800-827-0648]{.underline}.

Chief of Operations, Debt Management Center

\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--

FOR PROPER CREDIT TO YOUR ACCOUNT, PLEASE DETACH AND RETURN WITH YOUR
PAYMENT

  ------------------------------- ---------------------------------------
                                  **PAYMENT REMITTANCE**

  ------------------------------- ---------------------------------------

+------------+-------+--------------+---------------------------------+
| \* FILE    |       | AMOUNT       | ENTER YOUR CURRENT ADDRESS      |
| NO.        |       | ENCLOSED     | BELOW ONLY IF THE               |
+------------+-------+--------------+---------------------------------+
| PAYEE NO.  |       | \$           | ONE ABOVE IS INCORRECT. PLEASE  |
|            |       |              | INCLUDE YOUR ZIP                |
|            |       |              |                                 |
|            |       |              | CODE                            |
+------------+-------+--------------+---------------------------------+
| PERSON     |       | YOUR         |                                 |
| ENTITLED   |       | TELEPHONE    |                                 |
|            |       | NO.          |                                 |
+------------+-------+--------------+---------------------------------+
| DEDUCTION  |       | (INCLUDING   |                                 |
| CODE       |       | AREA CODE)   |                                 |
+------------+-------+--------------+---------------------------------+
|            |       |              |                                 |
+------------+-------+--------------+---------------------------------+
| \* Please  |       |              |                                 |
| include    |       |              |                                 |
| this       |       |              |                                 |
| number on  |       |              |                                 |
| your check |       |              |                                 |
| or money   |       |              |                                 |
| order      |       |              |                                 |
+------------+-------+--------------+---------------------------------+

FL 4-475, JUL 1992

Figure 8. First Collection Letter to Veteran

on Direct Loan Debt

App.-11

M26-4 November 19, 1992

Change 3

[NOTICE OF RIGHTS AND OBLIGATIONS]{.underline}

DEBTS OWED THE UNITED STATES GOVERNMENT: The law requires the Department
of Veterans Affairs (VA) to collect debts owed the government by reason
of participation in VA benefit programs. When the individual remains
entitled to benefits, VA is required to collect the debt by withholding
current or future benefits until the debt is paid, except as explained
below. If the individual is a current or retired federal employee the
debt may be referred for computer matching for the purpose of federal
salary offset or retirement pay offset. Any current or future VA benefit
payments, federal salary, lump sum or retirement payments, insurance
dividends, or other payments made under any law administered by VA may
be withheld.

NOTE: Whenever this letter states that you have a period of time to take
some action or to notify us, the period of time begins to run from the
date appearing on the front of this letter.

RIGHT TO DISPUTE THE EXISTENCE OR AMOUNT OF THE DEBT: If you tell us in
writing within 30 days that you believe that you do not owe this debt or
that the amount is incorrect, we will not withhold your future benefit
payments (if any) as scheduled until we confirm that you were overpaid
and the amount is correct or we determine that the delay required to
resolve the dispute will jeopardize our ability to collect the full
amount of the debt. You should explain, to the extent you can, why you
believe you do not owe the debt or why the amount is incorrect. A
determination on the dispute of a debt which is unfavorable to you will
not affect your right to appeal the decision underlying the debt to the
Board of Veterans Appeals.

RIGHT TO REQUEST WAIVER OF THE DEBT: Under certain circumstances, we can
grant a request to waive part or all of the debt. This means that you
will not be required to pay the amount waived. Since you received this
letter by certified mail, you have one year from the date the certified
mail receipt was signed to request a waiver.

Your waiver request must be submitted to us in writing. It should
explain any responsibility you may have had in causing the debt or why
you were not responsible for it, any undue financial hardship which
would be caused by collection of the amount owed, and any other
circumstances which you believe would show that collection of the debt
would be inequitable to you. If you request a waiver, we will ask you
for financial information to determine hardship.

NOTE: You can dispute the debt and request waiver in the same letter if
you wish. A VA service repre­sentative at your nearest VA regional office
will assist you with the preparation of this written notification.

EFFECT OF WAIVER REQUEST ON WITHHOLDING OF BENEFITS: If we receive your
waiver request within 30 days from the date of this letter, we will not
begin to withhold any VA benefits to which you may be entitled unless
your request is denied. If your waiver request is not received within 30
days, we will begin with­holding your benefits (if any) as explained on
the front of this letter, and the withholding will continue during our
consideration of your waiver request. If a waiver is subsequently
granted, any withheld amount which is waived will be refunded.

ORAL HEARING ON WAIVER REQUEST: You may request an oral hearing to
present evidence or argument on any point in connection with your waiver
request. If you desire a hearing, you should request it at the same time
that you submit your written request for waiver so that we can schedule
a bearing before any decision is made. If you do not request an oral
hearing on your waiver request within 30 days, we may make a waiver
decision without first holding a hearing. We will notify you of the
date, time, and place of the requested hearing. You may bring witnesses
and all testimony will be entered into the record. VA will furnish a
hearing room, provide hearing officials, and prepare a written
transcript of the proceeding. VA cannot bear any other expense of the
hearing.

NOTE: A waiver of a Loan Guaranty or Direct Loan indebtedness will not
restore Om entitlement used. If the loan is defaulted and the VA incurs
a loss on such loan. the loss must be paid in full to restore previously
used entitlement. [Further, you are]{.underline} reminded that a
discharge of indebtedness such as A waiver, may be considered [taxable
income and]{.underline} may be reportable [by]{.underline} you to the
Internal Revenue Service (IRS). A report of any waiver granted may be
provided by VA to the in accordance with IRS regulations.

ADMINISTRATIVE COSTS OF COLLECTION CHARGES: (Applies only if specified
on the front of this letter.) The monthly administrative cost of
collection fee will not be added to your debt if, within 30 day full
payment of the debt is received or an acceptable repayment plan is
worked out. If an installment repayment plan is worked out and any
installment is not received by the due date, the monthly administrative
cost of collection fee will thereafter be charged for the life of the
debt Other costs of collection may also be added to the debt if
add­itional collection actions become necessary.

REPRESENTATION: You may be represented, without charge, by an accredited
representative of a veterans organization or other service organization
recognized by the Secretary of Veterans Affairs. You may employ an
attorney to assist you, for example, an attorney in private practice or
a legal aid attorney. The services of an attorney representing you in
adjudicator proceedings before VA are subject to a fee limitation as set
forth in 38 U.S.C. 5904. If you desire representation and have not
already designated a representative, let us know and we will send you
the necessary forms.

Figure 8\--Continued. First Collection Letter to Veteran

on Direct Loan Debt

App.-12

October 2, 1995 M26-4

Change 10

**\[No-Bid Buydowns and Completion of FL 26-567, Statement of Account**

1\. There are two possible buydown situations: (a) the buydown reduces
the guaranteed indebtedness to a figure which remains greater than or
equal to the original loan amount; and (b) the buydown reduces the
indebtedness to less than the original loan amount. A separate buydown
calculation is used in each. Before executing a buydown, it is necessary
to test to determine which buydown calculation must be used. The
following instructions explain the test and provide formulas for the
minimum buydown calculation in each case.

a\. Add the maximum VA guaranty (as shown on the loan guaranty
certificate) to the net value of the property. If the guaranty plus the
net value is greater than the original loan amount, then:

Buydown Amount = guaranteed indebtedness - (net value + maximum
guaranty) + \$1.00

In this case, the buydown amount will reduce the guaranteed indebtedness
to a figure which is greater than or equal to the original loan amount.

[CAUTION]{.underline}: There will be rare cases when the total
indebtedness is less than the original loan amount. This will normally
take place if an insurance loss settlement has been applied to the loan
balance or in very old loans which have amortized so far that accrued
interest and advances total less than the amount of principal which has
been paid on the loan. In these cases, the maximum VA guaranty is not
the dollar figure shown on the loan guaranty certificate. It is the loan
indebtedness as of the cutoff date multiplied by the percentage of
guaranty shown on the certificate.

[NOTE]{.underline}: The interest component of the indebtedness is
calculated through the cutoff date. In other words, if the date of first
uncured default were April 1, 1993, and the cutoff date were March 18,
1994, the total number of days of accrued interest would amount to 383
(365 for March 1, 1993 through February 28, 1994 + 18 for March 1, 1994
through March 18, 1994).

b\. If the guaranty plus the net value is less than or equal to the
original loan amount, then:

net value

Buydown Amount = guaranteed indebtedness -
\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- + \$1.00

(1- % of guaranty)

In this case, the buydown amount will reduce the guaranteed indebtedness
to a figure which is less than the original loan amount, and the claim
payable by VA will be less than the original maximum guaranty on the
loan. This is because the claim payable by VA

Figure 9. Suggested Instructions to Servicers on Completion of Buydowns

App.-13

M26-4 October 2, 1995

Change 10

equals the percentage of guaranty applied to the guaranteed indebtedness
as of the cutoff date, or the original maximum guaranty, [whichever is
less]{.underline}.

2\. Notes on the formulas:

a\. The net value is provided on VA\'s advice letter stating that no
amount will be specified.

b\. The buydown may be applied to principal reduction, waiver of accrued
interest, the escrow account, unapplied funds or any combination of
these. The servicer is responsible for ensuring that the application is
a legitimate transaction to the account, reflected on the ledgers, and
that it does not affect the validity of the foreclosure. It is generally
not VA\'s policy to request copies of the ledgers with the statement of
account; however, field stations may require this submission from
servicers whose reported buydowns are not confirmed by the ledgers which
accompany their claims.

c\. The guaranteed indebtedness is usually calculated as of an adjusted
cutoff date or the actual foreclosure sale date, whichever is earlier.
VA notifies servicers of the adjusted cutoff date in the letter of
advice stating that no amount will be specified. Since VA extends the
cutoff date (which will be the originally scheduled sale date or an
earlier date established under 38 CFR 36.4319(f)) in order to permit the
buydown to take place, the buydown must occur within the extended period
allowed by VA or else VA\'s prior approval for a further extension must
be obtained. If the buydown can be completed in time for VA to issue
revised bidding instructions before the scheduled sale (or cutoff) date,
so no postponement is necessary, the cutoff date remains the originally
scheduled sale (or cutoff) date.

\(1\) Principal buydown cases are unnecessarily complicated by the fact
that accrued interest is calculated on the pre-buydown unpaid loan
balance up to the buydown date, and on the reduced balance from the
buydown date through the cutoff date. This creates unnecessary
additional work for VA and servicers in calculating the debt for
purposes of deciding whether a buydown is sufficient; it also makes the
calculation of the buydown amount and VA\'s analysis of the claim more
difficult.

\(2\) To simplify matters: If a 38 CFR 36.4319(f) or 36.4321(b)(2)
cutoff applies to the loan, and it falls on or before the buydown date,
VA will extend the cutoff date to the [date of the buydown]{.underline}
as reported on the statement of account, as long as this does not exceed
30 days past the scheduled sale date. Longer extensions require VA prior
approval.

**[Question]{.underline}:** If a foreclosure sale has been scheduled and
VA has not fixed a cutoff date, how can it be determined whether the
buydown takes place before or after the cutoff?

Figure 9\--Continued.. Suggested Instructions to

Servicers on Completion of Buydowns

App.-14

October 2, 1995 M26-4

Change 10

**[Answer]{.underline}:** In a normal foreclosure, if VA issues a
specified amount but the servicer passes a scheduled sale, VA fixes a
cutoff date as of the scheduled sale date (unless there is already an
earlier cutoff date applicable). This is a routine action and the
regulatory basis is 38 CFR 36.4319(f). If, in the absence of an earlier
cutoff date, a foreclosure sale is postponed so that a buydown can be
considered or completed, the servicer should [assume]{.underline} that
the scheduled sale date has become the cutoff date. This cutoff date
will be [final]{.underline} if the buydown occurs on that sale date or
an earlier date; it will be [temporary]{.underline} if the buydown
occurs on a later date, because the cutoff will be moved forward
automatically to coincide with the buydown date.

\(3\) This [does not apply]{.underline} when the buydown is completed
[before]{.underline} any cutoff date. In these cases, two separate
interest calculations will still be needed. This is because VA cannot
set an artificial cutoff date in order to make the calculations easier.
Such a date would be artificial because it would be earlier than the
date by which VA had decided foreclosure should reasonably have been
completed (i.e., VA can move an existing cutoff date forward in time,
but not backward, under these circumstances).

**[REPEAT:]{.underline}** Subject to the exception noted subparagraph
(3) above, the date the servicer reports the buydown took place will be
the cutoff date for all calculations on the account.

**[NOTE:]{.underline}** Servicers should make certain that the ledgers
which accompany the claim show the buydown taking place on the same day
reported on the statement of account. If it takes place earlier, no
problem is presented. If the buydown is not shown, or is shown on a
later date, VA\'s offer to purchase the property for the specified
amount will have been issued based on inaccurate information provided by
the servicer. In this case, VA\'s offer to purchase is void and the
property will be reconveyed to the servicer. The servicer will be billed
for return of the specified amount plus any property management expenses
VA has incurred.

d\. The indebtedness reported by the servicer on FL 26-567 is used by VA
to determine whether the servicer has the right to convey the property
after termination. It may be limited to principal, interest, advances
incurred for taxes and insurance and property preservation expenses
which have been authorized by VA. When the analysis of account and claim
is prepared, these items are all included in the computation of the
indebtedness as of the cutoff date. Consequently, the amount of claim
payable by VA will be the percentage of guaranty applied to the
indebtedness calculated in this way. The servicer has the option to
include other advances, such as liquidation expenses which have been
paid, property inspection fees and fees for notifying prior obligors of
a transferee\'s default. It is, however, strongly recommended that the
servicer omit these items from the

Figure 9\--Continued.. Suggested Instructions to

Servicers on Completion of Buydowns

App.-15

M26-4 October 2, 1995

Change 10

statement of account [unless]{.underline} the total reported
indebtedness is less than the original loan amount. If they are included
on the first statement of account filed, and a second must be submitted
to report a buydown, they should be omitted from the second and from the
servicer\'s calculation of the buydown amount.

e\. Since the amount of advances reported on the statement of account
only affects the claim payable in cases which must be bought down below
the original loan amount, and since the servicer does not know whether
or not a case will be a no-bid at the time the initial statement of
account is filed, VA will have no objection to the exclusion of the
liquidation expenses and related advances stated in subparagraph d above
from any statement of account. Servicers should, however, report their
action on the statement of account by stating: \"Liquidation expenses
and property inspection fees are omitted from this statement\--they will
be included on the claim,\" or something to the same effect.

f\. All eligible advances which are excluded from the statement of
account may be included when the claim is filed. The servicer must
understand, however, that VA cannot pay more than the property
acquisition amount plus the maximum claim payable based on the cutoff
date indebtedness plus the cost of the liquidation appraisal(s).

g\. If the buydown is applied to the principal balance, care must be
taken to ensure that accrued interest is calculated on the unpaid
principal as of the date of first uncured default through the buydown
date, and on the reduced principal balance from the buydown date through
the revised cutoff date. This two-step calculation should only be
necessary in a small number of cases. In most cases, the buydown date
will coincide with the revised cutoff date.

h\. Servicers may wish to increase the \$1.00 addition to the buydown
amount given in the formula in order to ensure that small differences
between their calculation of the guaranteed indebtedness and VA\'s
calculation do not result in an insufficient buydown. Servicers should
understand, however, that any addition reduces the claim payable by the
percentage of guaranty as applied to the excess buydown amount when the
total indebtedness is less than the original loan amount.

i\. In the formula, the percentage of guaranty should be expressed as a
decimal; i.e., a 40 percent guaranty is .40 and, for the calculation,
1 - .40 = .60.

j\. Servicers are responsible for handling any buydown transactions in
accordance with directives from their investors. In GNMA (Government
National Mortgage Association) loan cases, the principal buydowns should
be passed through to GNMA on the appropriate distribution date.

Figure 9\--Continued.. Suggested Instructions to

Servicers on Completion of Buydowns

App.-16

October 2, 1995 M26-4

Change 10

k\. Any unusual credits to the account, such as proceeds of insurance
loss settlements, should be shown as of the date received. VA will
credit these funds to the principal balance as of the receipt date when
computing the specified amount and for purposes of claim calculation.
Accordingly, to ensure the buydown amount is accurate, servicers should
credit them in the same way on the statement of account and in
determining the account indebtedness for purposes of calculating the
buydown amount.

l\. VA does not allow unlimited time, after advising a servicer that no
amount will be specified, for completion of the buydown. The cutoff date
will be extended 30 days from the date of VA\'s advice letter or from
the date of the foreclosure sale, whichever is later. Servicers needing
additional time may request an extension, but such extensions are not
granted automatically.

3\. **[EXAMPLE]{.underline}**

a\. Assume the following facts:

Original Loan \$100,000

Interest Rate 8.5%

VA Guaranty \$ 36,000

Percent of Guaranty 36%

Date of First Uncured Default 2/1/93

Unpaid Principal Balance \$ 98,000

38 CFR 36.4319(f) Cutoff Date 12/15/93

Scheduled Sale Date 1/20/94

Net Value of Property \$ 55,000

Date of Buydown 2/10/94

Rescheduled Sale Date 2/25/94

b\. The first statement of account is submitted to VA and VA replies
with a no specified amount letter.

c\. This letter provides two crucial pieces of information:

\(1\) The net value of the property (\$55,000); and,

\(2\) The amount of time the servicer has to complete the buydown.
(Since the original sale was scheduled for January 20th, VA will extend
the cutoff date to February 19th\--at the most\--in order to allow time
for the buydown to be completed. A buydown [after]{.underline} a cutoff
date has no effect.)

Figure 9\--Continued.. Suggested Instructions to

Servicers on Completion of Buydowns

App.-17

M26-4 October 2, 1995

Change 10

**[STEP ONE]{.underline}**

Using a buydown date of February 10, 1994, recalculate the amount owing
on the loan [excluding]{.underline} all advances other than those for
taxes and insurance.

\$98,000.00 Unpaid Principal

9,252.38 Accrued Interest at 8.5% through 2/10/94

1,200.00 Tax Advance

[300.00]{.underline} Insurance Advance

\$108,752.38 Total Debt to be Reported to VA

**[STEP TWO]{.underline}**

Do test one by checking to see if the guaranty (\$36,000) + the net
value (\$55,000) \> the original loan amount (\$100,000):

\$36,000 + \$ 55,000 = \$91,000 \$91,000 \< \$100,000. Therefore, it is
necessary to use the second of the two buydown formulas shown in
subparagraph 1 above.

**[STEP THREE]{.underline}**

Determine the buydown amount. The formula is:

net value

Buydown Amount = guaranteed indebtedness -
\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- + \$1.00

(1 - % of guaranty)

or;

\$55,000

Buydown Amount = \$108,752.38 -
\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-\-- + \$1.00

(1 - .36)

or;

Buydown Amount = \$108,752.39 - \$85,937.50 + \$1.00

= \$ 22,815.88

This would reduce the debt to \$85,936.50.

Figure 9\--Continued.. Suggested Instructions to

Servicers on Completion of Buydowns

App.-18

October 2, 1995 M26-4

Change 10

**[STEP FOUR]{.underline}**

Check the accuracy of the calculation (i.e., the net value plus the
guaranty should be greater than the debt). NOTE: Because the debt is
[less]{.underline} than the original loan amount, the guaranty has been
reduced to 36 percent of \$85,936.50 = \$30,937.

  ---------- ---- ----------- ---- ---------- --------------------- -------------
  Net Value       Guaranty                                          Debt

  \$55,000   \+   \$30,937    =    \$85,937   which is greater than \$85,936.50
  ---------- ---- ----------- ---- ---------- --------------------- -------------

**[STEP FIVE]{.underline}**

Now that the buydown has been tested, the servicer should decide, based
on its own analysis, whether or not to go through with it. If the
decision is affirmative, a revised statement of account must be
submitted to VA together with notice of the new sale date. When the
statement of account is revised, the servicer should make sure to omit
the advances which were left out of the buydown calculation and provide
a statement explaining why they were omitted. Also, it is recommended
that the buydown amount be increased by \$10 - \$100 above the
mathematical minimum just to be sure that some difference between the
servicer\'s calculation and VA\'s does not cause the buydown to be
inadequate.

**[NOTE:]{.underline}** The buydown must have taken place at the time
the statement of account is filed, so the date of the statement (item
11) must be on or after the date of the buydown (item 1a, 2b or 4).

When the claim is filed, all advances which were left off the statement
of account may be included. VA will allow them in the claim computation.
However, in no event will VA actually pay more than the property
acquisition amount of \$55,000 plus the maximum claim of \$30,937 plus
the appraisal fee of \$250. Servicers may be satisfied that the omission
of the advances does not affect the amount of claim payable by
recalculating the buydown with all eligible advances included in the
indebtedness.

Figure 9\--Continued.. Suggested Instructions to

Servicers on Completion of Buydowns\]

App.-19