Department of Veterans Affairs: Improved Measures Needed to Assess Supplemental Loan Servicing Program

GAO-01-610 Published: May 04, 2001. Publicly Released: May 04, 2001.
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The Department of Veterans' Affairs (VA) Loan Guaranty Program, which guarantees mortgage loans for qualified lenders, provides additional assistance to those who face financial hardship and possible foreclosure. This report discusses VA's supplemental loan servicing program. GAO (1) assesses VA's implementation of its policies and procedures for servicing troubled loans and (2) analyzes VA's measures for assessing the effectiveness of its supplemental servicing program and ability to generate meaningful data for overseeing and improving loan servicing. GAO found that the three regional loan centers it visited generally conformed with VA policies and procedures and had procedures in place to ensure that VA's loan servicing representatives complied with VA policies and procedures. Two issues affect VA's ability to effectively manage its supplemental servicing program. First, VA lacks meaningful performance measures that would allow it to accurately assess the effectiveness of its program. Second, VA's computer system has been unable to generate useful and timely management reports that regional loan center managers and headquarters staff could use to manage their supplemental loan servicing program.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Veterans Affairs The Secretary of the Veterans Affairs should direct VA's Under Secretary of Benefits to develop meaningful performance measures for the nine regional loan centers. The overall framework could include creating performance benchmarks that take into account the impact of economic conditions and legal requirements on VA's ability to reduce the number of foreclosures while holding down costs. The overall framework could also take into account the benefits of alternatives to foreclosure for veteran-borrowers, perhaps using a Foreclosure Avoidance Through Servicing ratio in conjunction with performance benchmarks.
Closed – Not Implemented
VA continues to believe that it has meaningful measures and that new meaningful performance measures would reduce the value of its current outcome measure.
Department of Veterans Affairs The Secretary of the Veterans Affairs should direct VA's Under Secretary for Benefits to take action to ensure that improvements are made in a timely fashion to its computer system so that it can generate accurate and useful management reports. These actions would include current initiatives to provide consistent business definitions of the alternatives to foreclosure. In addition, to implement the first recommendation, the actions would include compilation of data--such as average costs of alternatives to foreclosure and house price movements in the region--that could be used to assess benefits from supplemental servicing and to create benchmarks for regional loan center performance.
Closed – Implemented
According to a VA Memo dated 2/22/05, adequate reporting mechanisms have been developed and implemented with the Loan Servicing and Claims (LS&C) system. The reports range from early defaults to Foreclosure Avoidance Through Servicing (FATS) and servicing analyses. VA also will replace this system with a new VA Loan Electronic Reporting Interface (VALERI).

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