DEPARTMENT OF VETERANS AFFAIRS
REGIONAL OFFICE
NORRIS COTTON FEDERAL BUILDING
275 CHESTNUT STREET
MANCHESTER, NH 03101

September 24, 2002

In Reply Refer to: 373/26

LOAN GUARANTY INFORMATION LETTER NO. 26-02-11


TO: ALL VA LOAN SERVICERS AND HOLDERS

SUBJECT: EXPENSES FOR PROPERTY INSPECTIONS/PRESERVATION OF SECURITY

1. PURPOSE: Holders of loans guaranteed by the Department of Veterans
   Affairs (VA) and holders of VA Regulation (VAR) 4600 loans are responsible for
   taking proper measures to protect and preserve property pledged as security for
   these VA Guaranteed and VAR 4600 loans. This information letter describes the
   minimum requirements for securing vacant properties and the maximum expenses
   allowed for properties that are used as security for VA guaranteed and VAR 4600
   loans in Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode
   Island, & Vermont.
   
   It is not our intent to regulate the amounts that holders pay to protect and preserve
   properties or to decide what measures the holder needs to take to preserve a
   property. Our purpose is to specify the maximum amount that will be reimbursed by
   this Regional Loan Center (RLC).
   
   
2. EFFECTIVE DATE: This policy is effective for all VA loan foreclosures
   on or after October 1, 2002.
   
   
3. PRIOR APPROVAL: PRIOR APPROVAL IS NOT REQUIRED AND WILL
   NOT BE GIVEN. If an item is not covered by this information letter or there are
   unusual circumstances that support additional expense, you may submit complete
   information to justify the additional expense with the Claim Under Loan Guaranty and
   request reimbursement at that time. The holder is responsible for measures needed
   to protect and preserve the security for the loan. The decision as to what action to
   take to preserve and protect the property is the holder's decision, and it is
   independent of the amount of the costs that VA will reimburse.
   
   
4. HOLDER'S RESPONSIBILITY: It is the holder's responsibility to protect
   and preserve properties when they become vacant and abandoned. HOLDERS
   ARE TO ENSURE COMPLIANCE WITH ALL CITY, COUNTY OR OTHER
   ORDINANCES in accordance with the terms of the mortgage loan agreement. A
   holder may advance any reasonable amount necessary and proper for the
   maintenance or repair of the security and such advance may be added to the
   guaranteed indebtedness. Most security instruments have a provision to protect the
   property securing the loan. The removal of hazardous materials, the correction of
   hazardous conditions, and the avoidance of liens are primary concerns. Failure to
   protect and preserve the security may result in additional losses to the holder. A
   diminution in value may cause VA not to specify an amount for credit to the
   indebtedness in the event of foreclosure (no bid). If the holder's failure to protect
   and preserve the property increases VA's liability, the holder's claim payment may
   be adjusted (reduced).
   
   
5. REIMBURSEMENT: Holders will be reimbursed via the Claim Under Loan
   Guaranty for property inspections and preservation costs incurred before the interest
   cutoff date and before custody of a property is delivered to VA up to the limits
   specified below when the prescribed guidelines are followed. Evidence of payment
   must be submitted with the Claim Under Loan Guaranty, must describe the service
   provided and the materials used, and specify the date the service was performed.
   You may find the attached summary (Exhibit A) helpful.
   
   
6. ABANDONED PROPERTY: 38 CFR 36.4346(i)(2) requires that in cases
   where the loan is more than 30 days delinquent and the property is abandoned, the
   holder must take appropriate action to protect the property from vandalism and the
   elements. Within 15 days after confirming abandonment, the holder must report the
   abandonment to the Secretary and immediately initiate appropriate action to
   terminate the loan (38 CFR 36.4317(a)).
   
   
7. RESCISSION: This information letter rescinds all previous Loan Guaranty
   letters or bulletins issued on this subject by the Manchester Regional Loan Center.
   
   

Your continued assistance in helping us pursue our mission of providing quality
housing credit assistance to veterans and their families is appreciated.



/s/
Keith C. Boerner
Loan Guaranty Officer


Exhibit A for Loan Guaranty Information letter 26-02-11

Exhibit B for Loan Guaranty Information letter 26-02-11