Book Description

Pursuant to a congressional request, GAO reviewed the Department of Veterans Affairs (VA) Home Loan Guaranty Program, focusing on: (1) program effects of Deficit Reduction Act requirements that limited estimated VA losses per foreclosed property to the amount of guaranty on each property, and increased the percentage of foreclosed properties that VA sold for cash; and (2) whether VA could improve the property acquisition and disposition process to reduce program costs. GAO found that: (1) VA limited its estimated loss to the guaranty amount to meet the act's requirements, but did not estimate the interest costs of holding property in inventory until the property was sold; (2) VA could have reduced its costs by about $16.6 million in 1987, if it had considered interest costs; (3) VA could also have reduced losses incurred from declines in property value and from cash discounts offered for property resale by about $25 million in 1987; (4) cash sales for acquired properties increased from about 5 percent prior to the act to about 34 percent in 1987; (5) to increase cash sales, VA gave preference to cash offers that were equal to or greater than 90 percent of the property's listed price; (6) although cash sales had benefits, VA could have offset those benefits in some cases where buyers were willing to pay more than the listed price if VA financed the mortgage loan; (7) VA used third-party bidding in only 5 percent of its foreclosure sales in 1987; (8) the use of third-party bidding at foreclosure sales precluded VA from using its resources to hold and resell property, which avoided substantial depreciation on property costs; and (9) VA did not buy the least expensive title insurance policies on foreclosed properties.