VA's Home Loan Guaranty Program

GAO discussed the Veterans Administration's (VA) Home Loan Guaranty Program to: (1) determine the impact of the Deficit Reduction Act of 1984 on the program; (2) evaluate the process VA used to service defaulted loans; and (3) determine whether VA could improve its property acquisition process to reduce costs. GAO found that: (1) none of the offices it visited voluntarily notified veterans of financial assistance options available to cure their defaulted loans; (2) VA did not have a system to determine the number of delinquent loans that servicing technicians could handle; (3) the implementation of the Deficit Reduction Act resulted in an increase in defaulted loans and properties left with lenders; (4) VA financial assistance options included encouraging lenders to reduce loan interest rates, refunding the loan, and assisting veterans in selling their homes; (5) VA refunded only one mortgage for every 129 foreclosures during fiscal year 1986; and (6) the Houston office adjusted the calculation used to acquire foreclosed property and used auction sales to dispose of property at substantial losses. GAO concluded that VA could reduce its losses on defaulted loans by avoiding unnecessary delays in acquiring property, encouraging bidding at foreclosure sales, and acquiring properties through voluntary deeds.