Department of Veterans Affairs: Actions Needed to Strengthen VA's Foreclosed Property Management Contractor Oversight

GAO-08-60 Published: Nov 15, 2007. Publicly Released: Dec 17, 2007.
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Highlights

In 2003, the Department of Veterans Affairs (VA) significantly revised its in-house approach to managing and selling properties that become subject to foreclosure proceedings due to defaults by veterans on mortgages guaranteed by the department. VA contracted this function out to a private firm--Ocwen Financial Corporation (Ocwen)--after determining that doing so would increase the program's efficiency. VA oversees the Ocwen contract, which terminates in 2008, through onsite property inspections and other means. GAO was asked to (1) describe VA's inspection and other oversight findings and (2) evaluate VA's overall contract oversight program to determine whether any lessons can be learned prior to the implementation of the next contract in 2008. Among other steps, GAO reviewed VA inspection reports, accompanied VA staff on visits to three states, interviewed VA and Ocwen officials, and compared VA's procedures to those of other organizations that manage foreclosed properties.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Veterans Affairs To improve VA's capacity to oversee the foreclosed management property and sales processes, the department should take several steps in designing, negotiating, and awarding a new contract for the function. Specifically, VA should include in the contract the authority to impose defined penalties for key property management activities, including penalties for unsatisfactory performance in maintaining properties and selling them within established time frames.
Closed - Implemented
VA's new property management contract provides for penalties for unsatisfactory performance.
Department of Veterans Affairs To improve VA's capacity to oversee the foreclosed management property and sales processes, the department should take several steps in designing, negotiating, and awarding a new contract for the function. Prior to awarding the contract, VA should thoroughly review and verify the capacity of the contractor's information systems and the ability to provide required property management data.
Closed - Implemented
Prior to the award of the contract, VA reviewed information on the contractor's capacity to provide real-time property management data.
Department of Veterans Affairs To improve VA's capacity to oversee the foreclosed management property and sales processes, the department should take several steps in designing, negotiating, and awarding a new contract for the function. VA should use real-time data provided by the contractor to monitor the management of its foreclosed property inventory (or a sample thereof) on an ongoing basis and act on a timely basis, including the use of penalties as appropriate, to address identified deficiencies.
Closed - Implemented
VA has established processes to review contractor performance throughout the property management process rather than in the latter stages as was the case previously.
Department of Veterans Affairs To improve VA's capacity to oversee the foreclosed management property and sales processes, the department should take several steps in designing, negotiating, and awarding a new contract for the function. Specifically, VA should include in the contract the requirement that the contractor provide real-time property management data deemed necessary by the department.
Closed - Implemented
VA entered into a new foreclosed property management contract in 2008 that required the contractor to provide real time property management data.

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