Foreclosure Avoidance Through Servicing (FATS) Ratio
Strategic Goal: Ensure a smooth transition for veterans from active military service to civilian life. Veterans will be fully reintegrated into their communities with minimum disruption to their lives through employment services, including vocational rehabilitation; education assistance; home loan guaranties; life insurance; and transitional health care and readjustment counseling.
Objective: Improve the ability of veterans to purchase and retain a home through a loan guaranty program.
Performance Goal: Improve the FATS ratio to 40 percent.
One of VA’s critical functions is to assist veterans after they receive their housing benefit. Lenders report to VA when veterans are seriously delinquent (a payment is 90 days in default) on their mortgages. VA’s responsibility is to contact the veteran and offer assistance to help the veteran retain his or her home or resolve the issue at the lowest possible cost to the veteran and VA.
VA measures its success in assisting veterans who are facing foreclosure with the FATS ratio, which measures the extent to which foreclosures would have been greater had VA not pursued alternatives to foreclosure. When VA is able to pursue an alternative to foreclosure, the costs to the government are reduced. Veterans are able either to save their home or avoid damage to their credit rating. There are four alternatives to foreclosure:
Successful intervention – VA may intervene with the holder of the loan on behalf of the borrower to set up a repayment plan or take other action that results in the loan being reinstated.
Refunding – VA may purchase the loan when the holder is no longer willing or able to extend forbearance, but VA believes the borrower has the ability to make mortgage payments, or will have the ability in the near future.
Voluntary conveyance – VA may accept the deed in lieu of foreclosure from the borrower if it is in the best interest of the government.
Compromise claim – If a borrower in default is trying to sell the home, but it cannot be sold for an amount greater than, or equal to, what is owed on the loan, VA may pay a compromise claim for the difference in order to complete the sale.
Means and Strategies
Crosscutting Activities
Achievement of this performance goal is not directly dependent on other agencies.
Major Management Challenges
The LS&C component of the housing program is not able to optimally manage supplemental servicing of GI loans. Partially as a result of these deficiencies, foreclosures are excessive and claims against the veterans housing benefit program exceed by more than $29 million per year the amount considered tolerable. VA has not taken advantage of electronic data interchange capabilities offered by the mortgage lending community. It is the only major player in the mortgage lending industry without a modernized automated loan servicing system. This drawback will be corrected through the system currently being developed, which will automate routine and redundant activities, improving efficiency and allowing employees to concentrate on supplemental loan servicing.
Data Source and Validation
The VA Office of Inspector General (IG) is currently conducting an audit of this measure to determine its reliability. The IG expects to complete the audit during FY 2000.
(For additional information on this performance goal, refer to General Operating Expenses, Volume 4, Chapter 2D.)
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