The Mortgage Bankers Association has called for Department of Veterans Affairs policymakers to match the new partial claim more closely to borrower options offered in other parts of the market.

"As drafted, veterans will continue to have worse options than similarly situated non-veterans," Pete Mills, MBA's senior vice president of residential policy and strategic industry engagement, wrote in a comment letter submitted to the VA on Wednesday.

Mills said changes that can better align the VA partial claim with the market include:

• Only allowing loan modifications that increase payments at the end of the "waterfall" of foreclosure prevention steps that a distressed borrower goes through;

• Providing more in the way of forbearance options that address short-term hardships; and 

• Limiting distressed borrowers to one permanent option aimed at helping them avoid the loss of their homes every 24 months, except in the case of a natural disaster.

More leeway sought in deadlines

Mills also called for more implementation time.

He reminded policymakers that this was a challenge in implementing President Biden's previous effort to replace the pandemic-era version of the partial claim with an option known as the VA Servicing Purchase program.

"The industry experienced this exact issue with the prior administration's implementation of VASP," he said

Mills called for the industry to have a minimum of 180 days to gear up before making the new VA partial claim mandatory to manage expectations, with allowance for those with the capacity to move more quickly to do so.

"Several requirements have operationally challenging timelines, particularly where borrower documentation or validation of facts by the servicer is required," Mills added.

An unmanageable deadline, such as one that gives servicers less than 15 days to upload certain documents to the VA Loan Electronic Reporting Interface, creates a business concern for them because it threatens their ability to be reimbursed for advances, he noted.

"Even if they miss these deadlines, servicers should still be reimbursed for the advance, so long as the documents have been uploaded," Mills wrote.

Borrower determination and attestation

Mills also called for clarification around the standards for verifying information prior to submitting documentation.

"VA should specify how servicers can confirm that the property is the borrower's primary residence," he said.

Mills additionally suggested that an escrow analysis be done and considered in trial payment plans for borrowers to ensure their modified loan terms account for property tax and insurance payments. 

Setting payment deadlines for the end of the month rather than the 15th and providing some leeway when checks get returned for insufficient funds also would help borrowers manage their obligations and improve the chance of reperformance.

Some changes also should be made around inconsistent language that servicers attest to, according to Mills.

He said a reference to an agreement solely between the servicer and borrowers is at odds with one made about collectible debt due to the VA.

"Servicers would not be able to make these statements to veterans," he said, calling them "confusing or arguably deceptive."