VA Automates Loan Administration

The Department of Veterans Affairs' multiyear effort to revamp its mortgage servicing operation is due to cross the finish line with the rollout of its automated loan servicing information system now slated for November.

The new system called VALERI, which stands for VA Loan Electronic Reporting Interface system, is designed to make information reporting between VA and its loan servicers almost paperless.

"This new system is going to give us an enormous capacity to interact on a totally electronic basis with our servicers," Keith Pedigo, the director of VA's loan guaranty service, recently told a Mortgage Bankers Association conference.

The automated system, which is being tested, will allow the VA to monitor the servicing of individual loans and ensure private servicers are taking the proper steps to help veterans that are behind in their payments.

Currently, VA staff work directly with veterans to provide financial counseling and other assistance to avoid foreclosure.

In fiscal year 2006, VA staff intervention was successful in preventing 8,748 foreclosures, Mr. Pedigo said.

Under regulations expected to be finalized later this year, the VA will turn over those loss mitigation responsibilities to its servicers.

As soon as the servicing regulations become effective, possibly in October or November, the VA plans to start an 11-month phase-in of VALERI.

The VA recently published a proposed phase-in schedule with its two largest servicers - Wells Fargo Home Mortgage and Countrywide Home Loans - set to go first. Other servicers will be phased-in over the first three quarters of 2008.

The VA has published a list of all its servicers and the VALERI phase-in dates on its new VALERI webpage at www.homeloans.va.gov/valeri.ht.

Wells Fargo will go first because its servicing system is similar to the VALERI system that National Financial, Jacksonville, Fla., has developed and customized for the VA. Countrywide will go second because it has a proprietary servicing system.

"VA's goal is to bring on board the largest number of loans as early as its system can handle them, while also taking into account the number of servicers, the extent of servicers' interfaces, the types of loan portfolios, and other unique testing factors that VA can anticipate at this stage," the Federal Register notice says.

In the interview, the VA director cautioned that the timeline for finalizing publishing servicing regulations and going live with VALERI are not set in stone. "As we have learned from experience, we don't always meet those deadlines," Mr. Pedigo said.

However, the initial testing of the automated system has been completed and now the VA is starting the integration testing.

"We have made excellent progress on the VALERI system," Mr. Pedigo said.

He also stressed that the VA has worked with industry and the big-service bureaus - Fidelity and Fiserv - in developing VALERI and servicers will be very pleased with it.

"Our sense from the industry is that they are now very comfortable that they are going to get a system that will create significant efficiencies for them."

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