VA Loan Servicing PWS Draft.pdf

PERFORMANCE WORK STATEMENT (PWS)

U.S. DEPARTMENT OF VETERANS AFFAIRS (VA) NATIONAL PORTFOLIO SERVICING

1. INTRODUCTION

The Department of Veterans Affairs (VA) Loan Guaranty Service (LGY) administers a home loan program that promotes home ownership among our nation’s Veterans and active-duty personnel. The program provides Federal home loan guarantees on residential property purchased by Veterans and service members. For more information about the program, visit:

http://www.benefits.va.gov/HOMELOANS.

1.1. VA National Portfolio Servicing

Until 1997, servicing of the portfolio of loans was the responsibility of the LGY division at each of the

Regional Offices (ROs). VA provided full mortgage servicing, including customer service functions, tax payments and insurance premium payments, for the portfolio. VA’s portfolio had declined over previous years because direct loans were seldom made to Veterans under the G.I. Direct Home Loan program. In addition, most of the Vendee Loans were sold to trusts on a servicing released basis three

(3) times per year. Because of the reduction in VA’s active portfolio being serviced, VA determined that the loans could be sub-serviced by a single private Contractor at less cost to the Government. The

Contractor performs escrow management, loan servicing, custodial duties, loan sale processing, document procurement, and approval and completion of loan terminations.

1.2. Portfolio Loan Types

VA commonly refers to loans by “loan type.” The VA loan type is the 5 th digit in the full 12- digit loan identification number (LIN).

Collectively, the following loan types constitute VA’s loan portfolio:

1. Vendee Loans (Loan Types 3, 4, and 7) - Created when VA provides a purchaser with seller financing during the sale of a VA acquired property (REO);

2. 4600 Repurchased Loans (Loan Type 4) - Created when VA repurchases a Vendee loan previously sold to a private lender under the terms of 38 Code of Federal Regulations

(CFR) 4600 (Vendee loans have not been sold under the terms of this regulation since

1987, and VA does not anticipate future such sales).

3. Traditional VA Purchase (Loan Types 5) – Created when VA purchases a guaranteed loan from a private lender to help a Veteran avoid foreclosure and the loss of his/her home.

4. Direct Loans (Loan Type 1) - Typically created when VA issues loans directly to

Veterans on Native American Trust Land under the Native American Direct Loans

(NADL) Program. This loan type also includes a small number of direct loans funded by VA http://www.benefits.va.gov/HOMELOANS under the Specially Adapted Housing Program, and a declining number of older direct loans funded by VA under the G.I. Direct Home Loan program prior to the nationwide availability of private lender funding.

5. Covid Era Partial Claims – Created when VA purchases missed mortgage payments that the

Veteran- borrower was unable to make during the national COVID-19 pandemic. The missed payments are purchased from private lenders to help the Veteran return to making normal loan payments on a VA-guaranteed loan once the Coronavirus Aid, Relief, and Economic

Security (CARES) Act protections have expired; and

6. VA Servicing Purchase (VASP) Loan (Loan Type 8) - Created when VA purchases a guaranteed loan from a private lender to help a Veteran avoid foreclosure and the loss of his/her home. (Currently, VA does not offer the VASP loan purchase program and does not anticipate offering in the future).

1.3. Contract Administration Oversight

VA Central Office (VACO) Loan and Property Management administers the contract, establishes policy and assists in oversight of the National Portfolio Servicing Contract (NPSC). The Contract Assurance

Unit (CAU) conducts contract oversight and daily operations for Portfolio loans.

CAU has decision-making authority for approving proposed settlements, property preservation expenses that exceed published guidelines http://www.benefits.va.gov/HOMELOANS/servicers_valeri_rules.asp), terminations without foreclosure, specific loss mitigation recommendations (e.g., modifications,), and other inherently governmental functions or activities outside the Contractor’s scope of authority.

No VA sensitive personal information (SPI), Personally Identifiable Information (PII), or

Protected Health Information (PHI) may be stored, sent to, or accessed from outside the United States, its territories or its possessions without prior written approval by the Contracting Officer. A breach of this condition shall be considered a material breach that may warrant a termination of default.

1.4. Portfolio Servicing Profile and Data

This award entails services provided within the United States (U.S.). The U.S. is defined as the 50

States, Territories and possessions, the District of Columbia (D.C.), the Commonwealth of Puerto

Rico and the Commonwealth of the Northern Mariana Islands. The Contractor must be able to provide all services at the same level of service within all geographic locations. VA does not guarantee the volume specified in the following tables.

Table 1 provides the number of loans being serviced in VA’s portfolio and the Unpaid Principal

Balance (UPB), by loan type as of 7/30/2025.

http://www.benefits.va.gov/HOMELOANS/servicers_valeri_rules.asp)

Table 2 provides the severity, count and percentage of delinquencies in VA’s portfolio as of

7/30/2025.

Table 1: Number of Loans Currently Being Serviced & UPB by Loan Type

Loan Type Current Loan

Inventory

UPB

Vendee 1,091 $1135,511,046.26

NADL 546 $75,052,158.27

Repurchased

9 $134,572.57

Refunded 1,075 $76,256,711.88

Partial Claims 41,613 $1,705,935,071.39

VASP** 3,972 $1,210,234,192.06

Total* 48,304 $3,203,123,812.43

*Vendee numbers fluctuate due to loan sales; at peak times the total loans to be serviced could be around

20,000

Table 2: Severity, Count and Percentage of Delinquencies

Delinquency Count Percent

30 Day 870 13%

60 Day 438 6.5%

90+ Day 1,066 15.9%

Foreclosure 120 1.8%

1.5. Program Objectives

VA requires that the Contractor make prudent and appropriate business decisions that serve the interests of the VA and adhere to the constraints of this procurement and all appropriate laws and regulations. The primary objectives are:

1. Promote servicing practices that support VA’s mission of helping borrowers retain their homes or avoid foreclosure and provide excellent customer service.

2. Improve reporting, information management and security; and

3. Ensure accountability and fiscal responsibility for all activities and protect the interests of the Secretary of Veterans Affairs (the Secretary).

1.6. Purpose and Vision

The purpose of this acquisition is to procure a Contractor that must perform the following services in a defined, accurate, timely, measurable, and fiscally responsible manner that protects the interests of the

Secretary:

1. VA loan acquisition and servicing (VASP).

2. Vendee loan origination.

This performance-based award will incentivize the Contractor to continually improve performance and allow VA to better measure the Contractor’s ability to support its objectives. The following figure represents the high-level functions the Contractor must perform for VA, servicing and loan sale activities.

1.7. Matters requiring VA prior approval or matters requiring notice to VA for possible referral to DOJ

1. For this contract, the following activities require the Government’s prior approval:

a. Filing legal actions in the name of the Secretary.

b. Loan termination without foreclosure.

c. Proposed settlements or write-offs in excess of VA guidelines.

d. Preservation expenses are more than VA guidelines.

e. Legal fees more than VA guidelines or more than those which are reasonable and customary in the jurisdiction for same or similar services.

2. Matters Requiring Notice to VA for Possible Referral to DOJ.

The Contractor must immediately notify the VA National Practice Group (NPG) of any claim filed against the Secretary. The NPG will direct the Contractor how to proceed. The NPG, subject to the direction and supervision of the Department of Justice (DOJ), has final decision-making authority on whether DOJ will represent the Secretary.

a. Substantial Legal issues (such as the construction or constitutionality of federal statues, or issues of enforcement or issues that have significance for the government as a whole).

b. Counterclaims involving claims arising under other federal programs.

c. Attempts to file counterclaims as class actions.

d. Any order or judgment adverse to the government is entered in the case.

e. It is necessary to file or respond to a suit where another federal agency would be or is a proper party or has an interest in the property or action; and

f. Any other party files a notice of appeal.

2. APPLICABLE DOCUMENTS

This solicitation incorporates the following documents by reference, with the same force and effect as if they were given in full text. The Contractor must comply with these documents in performance of this Performance Work Statement (PWS):

a. Privacy Act, 5 United States Code (U.S.C.) §552a.

b. VA Directive 6500, Information Security Program (VA Handbook 6500.6, Contract

Security, which is available at: http://www1.va.gov/vapubs ;

c. Veterans Health Administration (VHA) Directive 0710 (Implementation Handbook

0710.01, which are available at:http://www1.va.gov/vapubsand http://www1.va.gov/vhapublications/index.cfm ;

d. Veterans Affairs Acquisition Regulation (VAAR)-852.273-75: Security

Requirements for Unclassified Information Technology (IT) Resources (Interim-

October 2008); and

e. Federal Information Security Management Act (FISMA), Appendix III of OMB

Circular A-130.

f. Rights in Data - General, Federal Acquisition Regulation (FAR) 52.227-14(d)(1);

g. VA Directive 6300, Records and Information Management (VA Handbook 6300.1

Records Management Procedure, and all applicable VA Records Control Schedules);

h. VA Information and Information System Security/Privacy Requirements for IT

Contracts, which is available at: http://www.iprm.oit.va.gov:

i. VA Directive 0730, Section 6 (Physical Security).

j. VA Memorandum: IT Oversight & Compliance Information Physical Security

Assessments, October 24, 2007;

k. VA Directive 0710, September 10, 2004, which is available at:

http://www1.va.gov/vapubs/viewPublication.asp?Pub_ID=487&FType=2 and l. Rights in Data and

Copyrights, FAR 27.401Definitions.

m. OMB Circular A-123, Managements Responsibility for Internal Control, appendix D, Compliance with the Federal Financial Management Improvement Act of 1996.

https://www.whitehouse.gov/omb/circulars a123rev/ http://www1.va.gov/vapubs%20%3B http://www1.va.gov/vapubs http://www1.va.gov/vhapublications/index.cfm%20%3B http://www.iprm.oit.va.gov/ http://www1.va.gov/vapubs/viewPublication.asp?Pub_ID=487&FType=2%20 https://www.whitehouse.gov/omb/circulars%20a123%20rev/

n. Provisions required in Contractor’s contract Fee Attorneys', Attachment G.

o. COVID-19 Veterans Assistance Partial Claim Payment Program including all related Circulars

(Circular 26-21-17 and currently Circular 26-24-2)

p. Veterans Affairs Servicing Purchase (VASP) Program Policy Appendix F of the VA Servicer

Handbook M26-4, VA Home Retention

Waterfall: https://benefits.va.gov/WARMS/docs/admin26/m26_04/m26-4-appendix-f-va-home-retention-waterfall.pdf

3. SCOPE OF WORK

The Contractor shall provide all resources necessary to accomplish the requirements described in this

PWS. Specifically, the Contractor shall provide and manage NPSC services for VA. The services shall include loan servicing, and loan sale activities. The Contractor shall continuously update and enhance information made available to the VA, technology and the performance of their overall service delivery, in a manner consistent with industry standards as defined by VA.

4. PERFORMANCE DETAILS

4.1 Performance Period

This contract’s base period of performance shall be October 1, 2026, through September 30, 2027. This contract shall have four (4) one-year option periods totaling five (5) years of performance.

Base Period Cost (FY'26) 10/01/2026-09/30/2027 $

Option Period 1 (FY'27) 10/01/2027-09/30/2028 $

Option Period 2 (FY'28) 10/01/2028-09/30/2029 $

Option Period 3 (FY'29) 10/01/2029-09/30/2030 $

Option Period 4 (FY'30) 10/01/2030-09/30/2031 $

4.2 Place of Performance

The work shall normally take place at the Contractor’s site; however, there may be an occasional meeting at a Government facility. No work at any Government site will take place on Federal holidays or weekends, unless directed by the Contracting Officer (CO).

https://gcc02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbenefits.va.gov%2FWARMS%2Fdocs%2Fadmin26%2Fm26_04%2Fm26-4-appendix-f-va-home-retention-waterfall.pdf&data=05%7C02%7C%7Ce1b8f140a2464c0d2d9208dc59668f18%7Ce95f1b23abaf45ee821db7ab251ab3bf%7C0%7C0%7C638483544224110965%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=7U57Gl2X03ALCqZmKuLCP8OjokN0lnjzmRQUyE%2Bax1Y%3D&reserved=0 https://gcc02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbenefits.va.gov%2FWARMS%2Fdocs%2Fadmin26%2Fm26_04%2Fm26-4-appendix-f-va-home-retention-waterfall.pdf&data=05%7C02%7C%7Ce1b8f140a2464c0d2d9208dc59668f18%7Ce95f1b23abaf45ee821db7ab251ab3bf%7C0%7C0%7C638483544224110965%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=7U57Gl2X03ALCqZmKuLCP8OjokN0lnjzmRQUyE%2Bax1Y%3D&reserved=0

4.3 Travel

VA estimates 4 face to face meetings per year to include several audits. VA expects that half of the meetings will be hosted by the Contractor, with the other half being hosted by the VA in either

Nashville, TN, or Washington, D.C. During transition into this contract after award, it is possible that additional meetings will be required. Contractor shall bear the expense of all their own travel.

5. TASK AND DELIVERABLES

This award entails services provided within the United States (U.S.). The U.S. is defined as the 50

States, Territories and possessions, the District of Columbia (D.C.), the Commonwealth of Puerto

Rico and the Commonwealth of the Northern Mariana Islands. The Contractor must be able to provide all services at the same level of service within all geographic locations.”

The Contractor shall have the capability and legal authority to originate loans in all U.S. states and territories. The proposal’s submission must include evidence that demonstrates that the awardee is fully licensed and permitted, by any and all relevant regulatory authorities, as necessary to perform all the duties and responsibilities set forth herein. All licenses and permits shall be current, active, and valid for the entire period of performance. The Contractor shall produce evidence of current, active, and valid licenses and permits, upon VA request, at any time during the period of performance. Lapses in current, active, and valid licensure or permits, or the awardee’s failure to provide timely evidence of such current, active, and valid licensure or permits, may constitute a breach of the awardee’s contract with VA, to be determined at VA’s sole discretion.

If the Contractor subcontracts any work or contractual duty prior to its contract with VA or within forty-five days (45) of its contract with VA, the Contractor shall include in its proposal submission evidence of the binding relationship between the Contractor and all of its subcontractors. If any work or contractual duty is subcontracted at any point during the period of performance, the Contractor shall provide to VA evidence of the contractual relationship between the Contractor and the subcontractor.

Any and all subcontractors must have the legal authority to carry out all the duties and responsibilities for which the Contractor has subcontracted in any jurisdiction covered by the subcontract. If the

Contractor subcontracts any work or contractual duty prior to its contract with VA or within forty-five days (45) of its contract with VA, the Contractor shall provide evidence that demonstrates that all subcontractors are fully licensed and permitted, by any and all relevant regulatory authorities, as necessary to perform any subcontracted duties and responsibilities set forth herein. All licenses and permits shall be current, active, and valid for the entire period of performance. The Contractor shall produce evidence of current, active, and valid licenses and permits of all subcontractors, upon VA request, at any time during the period of performance. Lapses in any subcontractor’s current, active, and valid licensure or permits, or the awardee’s failure to provide timely to VA, evidence of such current, active, and valid licensure or permits, may constitute a breach of the awardee’s contract with VA, to be determined at VA’s sole discretion.

The Contractor, at a minimum, shall provide all tasks and deliverables described within this document.

All deliverables must be submitted to the CO and Contracting Officer’s Representative (COR), or authorized designee, in accordance with the Schedule of Deliverables and shall meet the standards set forth in the Quality Control Plan (QCP) (See 5.2). Unless otherwise stipulated, written deliverables must be phrased in plain English. Statistical and other technical terminology must not be used without providing a glossary of terms. The Contractor shall attend a kickoff meeting at the VA facility, tentatively in the Washington, D.C. metro area within seven calendar days after contract award to review their plan to fully perform the requirements set forth herein. The Contractor shall comply with all applicable VA policies, as well as all local, state, and Federal regulations and laws (e.g., Treasury requirements, Service Members Civil Relief Act (SCRA), Truth in Lending Act-Real Estate Settlement

Procedures Act (TILA/RESPA Integrated Disclosure (TRID)), Fair Credit Reporting Act (FCRA), and

Fair Debt Collection Procedures Act (FDCPA) throughout the duration of the contract.

The Contractor at a minimum shall provide VA with “preferred customer” and priority status on process improvements, information technology, and reporting requests issued against this solicitation. The Contractor and the Contractors fee attorneys at a minimum must provide full- time resources tasked with this program working within the following functions/departments:

a. Account/Relationship Management Staff.

b. Title, and closing activities; and

c. Supervisory staff for all foreclosure, litigation, and loss mitigation activities.

d. Administrative functions such as finance, accounting, and reporting are not required to be dedicated.

5.1. Program and Project Management

The Government seeks a Contractor to provide comprehensive program management that is consistent with best practices.

5.1.1. Program Management

The Contractor’s Project Management Plan (PMP) must reflect and include a sub-task structure. This management approach must be detailed in the PMP. The Contractor’s PMP at a minimum must include:

1. Schedule Management – The development, management, and control of program schedules.

2. Risk Management – The planning, identification, analysis, monitoring, and control of and responses to program risk.

3. Communication Management – The timely and appropriate generation, collection, distribution, storage, retrieval, and disposition of program information.

4. Performance Management – The support of business outcomes, operational metrics, and quality management.

5. Details on its Management (e.g., staffing levels, resources,) and Subcontractor

Management Plan (e.g., document procurement vendors, fee attorneys, title companies).

6. Business Continuity Plan showing how it shall meet the contract objectives despite interruptions in operations due to natural disaster or other business interruption; and

7. Change Management Action Plan that identifies current business processes and proposed future processes (As-is/To-be) with strategies to minimize the impacts of these changes on the organization, customers, and constituents.

8. The Contractor is responsible to manage all expenditures related to the T&M CLINs. The

Contractor is responsible for providing a Month-to-Month Report tracking all expenditures associated with these CLINs, to include monitoring CLIN ceilings. Please be advised IAW

FAR 16.601(d)(2) if the contractor exceeds this ceiling price without notifying the

Government it is at the Contractor’s own risk. Failure to follow this instruction may result in the Contractor being responsible for any cost above and beyond the ceiling.

The Contractor must prepare a quarterly program management status report until such a time that the COR, or Authorized Designee, elects to modify this schedule in writing. These reports at a minimum describe the tasks, progress, and accomplishments for the period since the last meeting (activities and deliverables). It is expected that the Contractor must maintain adequate communication with the VA and

VA’s COR, or Authorized Designee, accordingly so that issues that arise are transparent to both parties to prevent escalation.

Deliverables

a. Business Continuity Plan

b. PMP

c. Monthly Reports

d. Quarterly Program Management Status Reports

5.1.2. Project Management

For significant tasks, deliverables, and milestones as defined by the CO/COR/Authorized

Designee, the Contractor at a minimum shall:

1. Identify in writing all necessary sub-tasks (if any) by task, together with associate sub-milestone dates.

2. Identify in writing a thorough test plan for any project involving system changes and provide VA a copy of the plan for approval prior to implementation.

3. Provide, via e-mail, meeting minutes of all Government/Contractor meetings.

4. Generate, collect, distribute, store, retrieve, and dispose of program information. VA will retain all rights to information developed through the program included in the deliverables and otherwise; and

5. Prepare monthly status and progress reports until such time that the CO/COR/Authorized

Designee elects to modify this schedule in writing. These reports shall describe the tasks, progress, and accomplishments for the period since the last meeting (activities and deliverables). It is expected that the Contractor shall keep in communication with the

CO/COR/Authorized Designee accordingly so that issues that arise are transparent to both parties to prevent escalation of outstanding issues.

a. Project(s) Level PMP

b. Monthly Project(s) Level Status Report

c. Meeting Minutes

5.2. Quality Control Plan (QCP)

The Contractor must provide a QCP, which outlines how the Contractor monitors its performance.

This plan at a minimum must:

1. Address tasks within this PWS to include measurable outcomes and definitions of success.

2. Contain controls, procedures, policies, quality control schedules, exception and escalation procedures, officer certifications, authorized signers, as well as plans to mitigate known risks.

3. Address critical aspects of the Contractor’s offering to VA, including known industry issues (e.g., property flipping, post audit by third party, property valuation and pricing, SCRA, loan modification programs).

4. Include a training plan for all employees including newly assigned staff as well as subcontractors.

5. Contain a performance plan outlining how the Contractor encourages high quality performance of both employees and subcontractors.

6. Provide details on the separation of duties between operations and audit/oversight staff.

7. Provide quarterly Internal Control Reports based on VA loans and properties.

8. Ensure audits do not have substantive findings (material weaknesses or significant deficiencies). The Contractor must provide VA with a written response to all non-substantive findings within one (1) month and resolution within two (2) months from the date of notification.

9. The Contractor must provide VA with a written response to all substantive findings within two (2) weeks and resolution within four (4) weeks from the date of notification.

10. Proactively recommend and implement process and technology improvements that positively impact operations.

11. Reporting capabilities for Originations, Vendee, Servicing Transfer and

Servicing. This includes reports showing all transactions performed by the contractor; and

12. Ensure records for all portfolio loan accounts are maintained.

a. QCP

5.3. General Requirements

The Contractor, as an agent of the VA, at a minimum shall:

1. Demonstrate and maintain the ability to advance no less than $30 million of corporate funds/line of credit to perform the tasks under this contract prior to appropriate reimbursement from VA.

2. Comply with the requirements of the contract including direction provided by CO, COR, or

Authorized Designee concerning all actions involving loans or properties under this contract. Failure to do so may result in financial penalties or breach of contract. These financial penalties may be incurred by failing to protect the Secretary's interest; and

Errors and Omissions will result in an administrative fee in the amount of 10% of the initial list price of the property, or in the case of Redemptions 10% of the PM net value. This administrative fee is in addition to a charge to the Contractor for the quantifiable loss. Errors and Omissions are not a component of the incentive/disincentive performance measures and are not limited to the dollar threshold therein.

An example would be the origination of a Vendee loan at an incorrect (lower than the established rate) interest rate. VA will quantify the amortized cost to VA of the difference between the correct interest rate and the employed interest rate and charge the Contractor for that amount plus a 10% administrative fee based on the initial list price.

a. Reimburse VA for losses due to unjustified delays in initiating, prosecuting, or delivery of contract requirements including but not limited to:

i. Bankruptcies.

ii. Litigation.

iii. Conveyance.

iv. Title.

v. Reports.

vi. Foreclosure.

Losses incurred due to errors and omissions will result in a Bill of Collection or in an offset to invoices for those quantifiable losses plus 10% of the loss.

3. Be responsible for cost due to Contractor negligence, as defined by VA, including but not limited to, damages due to failure to secure or maintain property, tax penalties, etc..

4. Appear (at Contractor’s expense) on behalf of VA as a witness regarding these requirements.

5. Research for sold, terminated, or otherwise inactive National Portfolio loans and related instruments. VA has historically performed Vendee loan trust sales. As an occasional consequence of VA’s loan sale operation, VA receive inquiries regarding properties that may still appear to be recorded to the Secretary of Veterans Affairs but were actually sold. The RPSC Contractor shall research trust cases and other property related questions that are brought to the attention of the VA by inquiries or that are otherwise impeding the

Secretary’s business by virtue of information on the public record, etc.

6. Keep records satisfactory to VA pertaining to each property and loan. Records and related documentation, including all records involving work performed on VA properties and loans, are VA’s property.

7. Archive physical records to a Federal records center, as specified by VA.

8. Accept VA’s delegation of authority to execute all documents necessary for the management and sales of residential real property acquired by the Secretary of VA according to 38 C.F.R. § 36.4345(f).

9. Accept VA’s delegation of authority to prepare and execute all documents that are necessary for VASP under 38 C.F.R. § 36.4345(e).

10. Provide VA with a quarterly list of employees authorized to sign documents under this contract and sample of their signature.

11. Provide VA with an updated list of phone numbers, addresses, email addresses for all departments and key personnel that regularly interact with VA and customers, including borrowers, offerors, etc. This list must include contacts for sending various types of mail, payments, inquiries, tax bills, closing documents, insurance bills, etc.

12. Maintain and provide, upon request, evidence of acceptable coverage to protect VA’s investments and assets such as, but not limited to, Fidelity Bond Insurance, Errors and

Omissions Insurance, etc.

13. Furnish a performance bond (Standard Form 1418) for the protection of the Government in an amount equal to 10% of the original contract price, and a payment bond (Standard Form

1416) in an amount equal to 10% of the original contract price. The “Original Contract

Price” means the award price of the contract, and does not include the price of any options, except those options exercised at the time of contract award.

14. Ensure that maximum practical opportunities exist in the Contractor’s Subcontracting

Plan for small businesses, especially those owned by Veterans. VA’s current subcontracting goals are as follows:

a. Small Business

17.7%

b. Veteran Owned Small Business 5.0%

c. Service-Disabled Veteran Owned Small Business 3.0%

d. Small Disadvantaged Business (includes Section 8(a)) 5.0%

e. Woman-Owned Small Business 5.0%

f. Historically Underutilized Business (HUB) Zone Small Business 3.0%

15. Ensure that all data and files used in relation to VA properties and loans are auditable by the Government or its designee.

16. Input information upon initiation of any activity for any property and loan into the

Contractor’s Information Management System.

17. Provide loan data and physical loan files. The current industry standards have been historically inconsistent. The Government seeks new and innovative procedures to ensure the quality and reliability of the physical loan files and loan data. The Contractor must ensure liquidity and marketability of loan sales by:

a. Auditing electronic and paper files for completeness and accuracy.

b. Identifying trends in new originations concerning documentation or electronic record deficiencies.

18. Ensure financial transactions and accounting events are adequately recorded in accordance with Treasury requirements.

19. Ensure internal financial management processes are subject to Government audit and must comply with all appropriate financial laws, regulations, and requirements (e.g.31 U.S.C. §

3302(b) (cash deposits) and 1 Treasury Financial Manual (TFM) 6-8030).

20. Ensure all funds are segregated and separate records are maintained related to VA’s loans. Separate accounts and reconciliations must be established and performed for all activities.

21. Ensure all documents are tracked using dated version control.

22. Ensure delivery of policies and D e s k T o p P r o c e d u r e s (DTPs) that are clearly documented and followed; and

23. Ensure delivery of end-to-end maps with graduated levels of detail, including a High-

Level Functional Map, a Process/Activity Map, and a Detailed Process Map are provided. Steps in lower-level maps must be easily reconciled against higher-level maps and vice versa, and must display the interconnectivity between functions, processes, SOPs, policies, and activities.

24. Generally, VA’s strong preference is to avoid the execution of foreclosures or evictions between Thanksgiving and New Year’s Day. The Contractor shall conduct the necessary analysis, planning and communication to ensure that any potential exceptions (i.e.

foreclosures delayed by repeated bankruptcy, extended eviction proceedings, etc.), are identified and escalated to VA.

25. VA and DOJ have established standard contract language (see attachment G) to be incorporated into the agreement by the Contractor with any fee attorney working on behalf of the Secretary. The agreement entered between the fee attorney and Contractor must include provisions stated in Attachment G.

a. Verifiable evidence of ability to advance $30 million

b. Quarterly report listing authorized signers and their titles

c. Contact Information

d. Written evidence of Fidelity Bond Insurance, Errors and Omissions Insurance, and

Performance Bonds

e. Physical loan files

f. DTPs

g. End-to-end maps

5.4. Vendee Origination

The Service Provider must originate and underwrite Vendee Loans. Vendee financing is a Department of

Veterans Affairs (VA) direct loan program that is available to purchase VA Real Estate Owned

Properties (REO). Vendee financing is offered to both Veteran and non-Veterans. VA funds these loans and boards them into VA’s National Loan Portfolio. These loans are then, at the sole discretion of VA, packaged by the Contractor and included in Loan Sales as described in Section 5.6.8 or held in the VA loan portfolio.

1. Ensure that all closings are completed in a timely manner that is consistent with industry standards. When necessary, the Contractor shall advance funds on behalf of the VA to complete Vendee closings

2. Provide an itemized accurate breakdown of all Vendee financing seller concessions within seven calendar days of closing.

3. The VA will unilaterally set the origination fee charged to the borrower in accordance with

38 U.S.C. § 3733. The Contractor shall collect this fee and remit it to VA. The contractor shall then invoice VA for the origination fees agreed upon in this contract.

4. The Contractor’s work processes for Vendee underwriting must be capable of closing within 30 calendar days from application subject to title

5. Apply VA credit underwriting standards, as defined in chapter four in the VA Pamphlet

26-7 - Lender’s Handbook.

6. Distribute borrower education and marketing materials to support Vendee financing and provide a Vendee Advertising Plan

7. Properties with Vendee financing close only after VA NPG provide an acceptable opinion of title if required.

5.6 Portfolio Loan Servicing

5.6.1 Servicing Standards Hierarchy

The Contractor must service the VA portfolio of loans in accordance with this contract, policy, or direct instructions provided by the CO/COR/Authorized Designee, and/or FNMA servicing standards, in that order of precedence.

5.6.2 Ancillary or Other Servicing Fees

Ancillary Fees will be set in compliance with 38 U.S.C. § 3733 but will not be remitted to VA.

5.6.3 Boarding

The Contractor at a minimum shall board all tVAP, Vendee, NADL, Partial Claims, and

Repurchased loans within seven calendar days after receiving loan information from VA.

The loan information includes the following fields: Vendee loan number, VA identification number, buyer's name, loan amount, down payment amount, interest rate, loan term, monthly principal and interest (P&I), monthly taxes and insurance (T&I), initial escrow deposit, interest amount collected at closing, Vendee cohort year, Vendee fund, closing date, date processed in VA system and date sent to the Contractor.

The Contractor shall provide a solution that can minimize the time between the closing of the

REO asset, delivery of the TRID data, and the boarding of the new Vendee

Loan. Before completing the boarding of Vendee Loans only, the Contractor shall notify VA that the closing of the REO asset has occurred and provide the TRID data, as established in the Marketing and Selling Property section (see 5.4.6) of this PWS.

Note: The Contractor may begin the boarding process, however, the contractor will not include the new Vendee loan within its financials until TRID data are transmitted to VA.

5.6.3.1 VASP Loans

The Contractor shall manage the remaining transfer of VASP loans from the Guaranty

Servicer/Lender. The Contractor will not be responsible for inaction or failure to perform by the Guaranty Servicer/Lender. Loan information from the Guaranty Servicer/Lender will be construed as correct and accurate by the VA with the only exception being if The Contractor cannot validate VA Loan Identification Number, loan amount (as acquired), interest rate (as defined by the VASP Program), loan term (acceptable by the VASP Program definition), cohort year, fund, date processed by VA. All other information received on the loan will be deemed as correct and accurate by The Contractor and by VA.

For VASP VA purchased loans from multiple servicers and due to timing issues had them sent directly from the servicer to the contractor, usually with multiple loans at once.

Transfers will take place per regulatory guidance and industry standards. These activities are to reconcile data and ensure that the modification, and the asset VA purchased are matched electronically and in the physical file, the terms are all correct, and the collateral is all present in case the loan defaults and VA will have to foreclose to obtain the real property.

These activities are a preservation of VA's asset, in this case a VA purchased loan. Once the loans are boarded to the contractor's system servicing of direct loans will follow contract requirements cited within 5.6.4 – 5.6.7.

Expected Activities Include (See Attachment K for full definitions):

• Data Tape Set Up

• Data Tape Transfer

• Receiving Boarding Data

• Loading Boarding Data

• Run Logical/Illogical Data Checks

• Quality Assurance Data Reconciliation

• Servicing Record Updates

• Receipt of Physical Collateral

• Partial Claim Notes,

• Partial Claim Recorded Mortgages,

• Recorded Subordination Agreements,

• Assumption Agreements,

• Release of Liability

• Send Collateral to Storage

• Image Collateral

• Confirmation of Boarding

• Post Boarding/Finalization Servicing

5.6.4 Non-Default Servicing

The Contractor at a minimum shall:

1. Collect and properly apply all payments.

2. Accept partial payments in accordance with 38 CFR 36.4316.

3. Document all actions and communications with borrowers in a searchable, electronic record format.

4. Provide systems that enable borrowers to check loan status.

5. Perform a full tax service and a complete tax search within 30 calendar days of assignment to ensure that:

a. Property taxes are paid to date and no penalties or interest accrue or duplicate payments are made; and

b. All available discounts are utilized. (note: this does not apply for servicing of partial claims)

6. Advance any escrow shortage to pay for taxes when necessary and seek reimbursement from the borrower.

7. The Contractor shall pay all hazard and flood insurance, except for servicing partial claims, to include:

a. Providing transferable “life of loan” flood service contracts. These contracts shall be obtained on all new tVAP, repurchased, and direct loans within 45 calendar days of assignment. This includes NADLs, and loans repurchased under VAR 4600 and, if appropriate, from American Housing

Trust (AHT) or Vendee Mortgage Trust (VMT). In the event the Contractor requires additional information from VA in order to obtain the flood service contract, the number of days taken by the VA office to provide the required information shall be added to the Contractor's total time allowed for that loan.

b. Maintaining flood status of the portfolio loans in accordance with National

Flood Insurance Reform Act of 1994, Pub. L. 103-325, 108 Stat. 2255

(codified as amended in scattered sections of 12 and 42 U.S.C.).

c. Monitoring and reporting disbursement of loss settlements.

d. Ensuring timely payment of premiums to avoid lapses of coverage and non-covered losses.

e. Obtaining force-placed insurance when necessary to avoid lapses in coverage; and

f. Advancing any escrow shortage to pay for insurance premiums when necessary and seeking reimbursement from the borrower.

8. Provide document custodian services in accordance with industry’s best practices. The Contractor will be responsible for the storage, maintenance and retrieval of all hard copy and imaged copies of custodial documents associated with all loan and property assets managed under this contract in accordance with VA’s Record Control

Schedule (RCS). The Contractor shall image and store all documentation in electronic format that is indexed to simplify searches. The contractor shall also import, normalize, index, make searchable and make viewable, all data and images for inactive National Portfolio loans sourced from

National Portfolio Servicing incumbents or VA. Every hard or electronic file contains one or more documents. For the purposes of reporting, customer, ad-hoc or others, records for active and inactive loan records will be treated the same. The following electronic files, including images, shall be transferred to the contractor at VA’s sole discretion. 1) The immediate incumbent (Vendor Resource Management) has 5,140 inactive hard copy loan files and approximately 3,100 inactive electronic loan files, which occupy approximately 1TB of storage; 2) the prior incumbent

(Vendor Resource Management) has no more than 2TB of electronic records. This data is currently in VA’s possession but may also be sourced directly from the incumbent; 3) the next prior incumbent (Ocwen) has no more than 2TB of inactive loan data and images. This data is currently in VA’s possession but may also be sourced directly from the incumbent. New electronic records shall be stored in PDF format.

Inactive electronic records sourced from VA, or the incumbent may be converted into PDF or may remain in the format in which they were delivered. At the completion of this contract, and at VA’s unilateral discretion and in a timeframe, form, format and process acceptable to VA, the contractor shall transfer all hard copy and softcopy files in its possession to a successor or VA location within the United States.

5.6.5 Default Servicing

1. Actively pursue and document all collections, loss mitigation, and related servicing efforts through termination (or redemption) of the loan (this is not applicable to partial claims);

2. Make recommendations to modify delinquent loans in the portfolio pursuant to

VA standards as provided in the attachments (this is not applicable to partial claims).

3. Service low balance or matured loans pursuant to VA standards as provided in the attachments (this is not applicable to partial claims).

4. Provide additional forbearance consideration to disabled Veterans with tVAP loans, Native American Direct Loans (NADL), and Specially Adapted Housing

(SAH) loans (this is not applicable to partial claims).

5. Refer the loan to the Contractor’s fee attorney upon recognition of insolubility

(this is not applicable to partial claims).

6. Initiate and manage termination of non-judicial and judicial foreclosures processed by Contractor’s fee attorney, NPG or Department of Justice (DOJ)

(e.g., NADLs) (this is not applicable to partial claims).

7. File “Proof of Claim” prior to the expiration of the bankruptcy bar deadline and monitor bankruptcy progress, track and reconcile trustee payments, and report bankruptcy event timeline progress on all bankruptcies, as appropriate.

Requests for dismissal of Chapter 13 bankruptcies shall be made with prejudice in cases of multiple filings. Fully document all actions taken.

8. Report to and coordinate with NPG or the DOJ in contested cases such as, but not limited to, foreclosures or bankruptcies for appropriate action

(e.g., court appearance, file relief from stay, any appealed or contested case where VA is listed as a defendant).

9. Brief COR, or Authorized Designee, on contested cases monthly; and

10. Pay mortgage interest mandated by bankruptcy trustee or court to VA with loan level supporting documentation.

5.6.6 Foreclosures

The Contractor at a minimum shall (note that every bullet under this section does not apply to partial claims):

1. Adhere to the time frames provided by VA guidelines.

2. Complete referral and termination of non-judicial and judicial foreclosures to the appropriate Contractor’s fee attorney. When reviewing loans, VA will reimburse attorney fees in accordance with the VA guidelines. Additional fees require justification and prior VA approval.

3. Complete referral of judicial foreclosures in certain jurisdictions to NPG or

DOJ, as appropriate.

4. Track and report event timeline progress on judicial and non-judicial foreclosures, including cases handled by NPG and DOJ.

5. Complete payments of all liquidation expenses on all foreclosures handled by the

Contractor and submit voucher for reimbursement on invoice after foreclosure is completed.

6. Ensure liquidation appraisals are ordered from an appraiser on the VA fee panel using Web LGY for all loans, including loans with Installment Contracts, in time to determine proper net value and bid amount for the foreclosure sale The contractor will utilize the most recent version of the VALERI Fee Cost Schedule as a guide for determining the maximum allowable pricing for all appraisals ordered under the requirements of the RSPC. The most recent version of the VALERI Fee Cost Schedule is located on the following webpage.

https://www.benefits.va.gov/HOMELOANS/servicers_valeri_rules.asp

7. Ensure all liquidation appraisals are reviewed by individuals approved by VA under the general guidelines established for Staff Appraisal Reviewers (SAR) in

VA Pamphlet 26-7, Lenders’ Handbook, Chapter 15.

8. Maintain active VA SAR on staff to provide coverage on every business day of the entire period of performance.

9. Compute the net value (see below) of the property and enter a bid at the foreclosure sale on behalf of the Secretary in the amount of the net value of the property or the total indebtedness outstanding on the loan, whichever amount is http://www.benefits.va.gov/HOMELOANS/servicers_valeri_rules.asp less. In those jurisdictions where state or local laws dictate other bid requirements (e.g., a minimum bid, a certain percentage of the liquidation or other appraisal amount), the Contractor shall enter an appropriate bid that will protect VA's interests while complying with state or local requirements.

10. Net value is defined as the "as-is" value of the security property as determined by a VA liquidation appraisal, minus an amount representing the costs that the Secretary estimates would be incurred by VA in acquiring and disposing of the property. These costs are subject to change and are posted on the VALERI website

(http://www.benefits.va.gov/HOMELOANS/servicers_valeri.asp); and

11. Conduct and fully document property inspections and preservation actions taken to protect the VA's interest up to loan termination.

a. Evidence of SAR training completion from VACO

5.6.7 Loan Termination

After portfolio loan foreclosure/termination, the Contractor at a minimum shall (the bullets below do not apply to partial claims, except for #7):

1. Advise the VA of the results of each sale within five calendar days of each completed foreclosure sale, expiration of a ratification period, or other final loan termination action required by local or state jurisdiction. The Contractor shall reimburse VA for any expenses related to erroneous notices of conveyance.

2. Upload conveyance data to VA within five calendar days of final termination.

The conveyance period is subject to the official terminating event in the state for which the property is located be it foreclosure, ratification or confirmation. REO expenses shall not begin until after conveyance.

3. Notify the COR, or Authorized Designee, and VA’s eligibility center of loan terminations and loss amounts on loans involving Veterans’ entitlement benefits/eligibility on a monthly basis.

4. Disburse, properly apply, document, and report all foreclosure expenses and sale proceeds.

5. Provide VA with a complete title package (as determined by 38 CFR 36.4323 and http://www.benefits.va.gov/HOMELOANS/servicers_valeri.asp)

NPG) within the established VA timelines after the foreclosure sale date, redemption date, or other determinant that finalizes loan termination unless otherwise directed by VA; and

6. Correct any defects in title that are the result of failure to properly terminate the loan. (This does not apply if the foreclosure was completed by NPG or the

DOJ.)

7. For servicing of partial claims ONLY, the contractor shall complete a close out for each partial claim either paid off or eliminated through a cash out refinance.

Note: this bullet is only applicable to servicing of partial claims, and no other part of this PWS.

a. Monthly report on funds received from 3rd party bidders, NPG, and DOJ or their attorneys.

b. Monthly report to VA’s eligibility center

c. Monthly report to NPG

5.6.8 Loan Sale Assistance

VA is not currently conducting loan sales however we anticipate this function returning at a future date.

1. Provide all data, information, and loan files required to successfully process and complete VA trust sales in accordance with VA instructions and prior to the end of the month of the loan sale. This information includes, but is not limited to, loan-level reporting and proposed pool-level reporting.

2. Provide loan assignment and shipping of files to VMT document custodian in accordance with the Pooling and Servicing Agreement (PSA).

3. Abide by the published processing schedule prior to each deal.

4. Abide by the established VA eligibility criteria.

5. Coordinate with the underwriting syndicate to ensure all documentation, including disclosures, opinions, and data is accurate; and

6. Report on and provide static pool analysis on the existing portfolio.

a. Disclosures and opinions related to the sale

5.6.9 Loan Accounting

The Contractor shall provide all loans accounting information in a timely and accurate manner as prescribed by the VA and shall:

1. For loan sales:

a. Segregate loans by cohort years and funds symbol.

b. Provide financial records in a format that fully complies with the Credit

Reform Act. Loan modifications shall be recorded in proper fund/cohort year with interfund reimbursements as required. Provide financial records and reports that facilitate billings, reports, and audits; and

c. Provide timely reports to VA for reconciling cash and for accounting purposes, e.g., aging Treasury Report on Receivables (TROR)

(delinquency), application of cash to principal and interest, cash suspense, and loan sale reports. Reporting shall be consistent with data transmitted to VA.

2. Provided that all loans in foreclosure, all information required by VA to determine its liabilities and contingent liabilities.

3. Comply with all VA information requirements for Internal Revenue Service

(IRS) reporting (e.g., 1098, 1099,).

4. Reconcile cash received and apply to portfolio as interest and/or principal with changes in portfolio…