VA revised chapter 5 of the Servicer’s Handbook (M26-4) to add the new VA Loss Mitigation Waterfall, update loss mitigation program requirements, and provide clarification and additional details on Trial Payment Plans (TPPs). Specifically, sections 5.01, 5.02, 5.04, 5.05, 5.06, 5.07, 5.08, 5.09, and 5.11 were added and/or updated as follows:

• 5.01: added to outline the steps required in the new VA Loss Mitigation Waterfall, including the addition of the VA Partial Claim program in Step7. Also, subsequent sections were renumbered. In addition, Section 5.01(e) also includes a reference table, providing comparison and high-level information on all loss mitigation options;
• 5.02: updated to reference the VA Partial Claim program as a home retention option. Also, references to VA Purchase were removed, section 5.02(d) was added to provide guidance on pre-approval requests to deviate from the VA Loss Mitigation Waterfall, section 5.02(f) included minor grammatical edits, and section 5.02(h) was updated to remove reference of the National Emergency Declaration reason for default;
• 5.04: updated to provide clarification on reporting the special forbearance event on loans that are less than 61 days delinquent.;
• 5.05: updated to provide clarification on reporting the repayment plan event on loans that are less than 61 days delinquent. Also, section 5.05(b) was added to provide guidance on offering extended repayment plans at 12 and 18 months when the loan’s current interest rate is less than the current maximum allowed modified rate;
• 5.06: updated general loan modification guidance to require the events or circumstances causing the default to be resolved prior to review, provided clarification on the regulatory requirements for loan modification reviews and included a provision regarding previous VA Partial Claims, and reordered and clarified guidance for pre-approval requests for loan modifications that do not conform to the requirements outlined within chapter 5;
• 5.07: largely rewritten to follow the TPP requirements in the VA Loss Mitigation Waterfall. Also,
  • Clarification was provided on the written agreement requirements, length of the TPP, and TPP payment amounts;
  • Dates and examples were provided for terms of the TPP, as well as clarification on what VA considers a failed TPP;
  • Guidance was included to limit the number of failed TPPs to three times during a single default episode;
  • Clarification was added to address the timeframes to offer the final loss mitigation option after successful completion of the TPP, and requirements for payment after the final
  • TPP payment is received; and
  • A section was added to outline TPP event reporting in VALERI.
• 5.08: added to provide guidance on loans with an outstanding VA Partial Claim;
• 5.09: updated to consistently reflect the Deed-in-Lieu (DIL) acronym and section 5.09(c) was added to provide guidance on loans with an outstanding VA Partial Claim; and
• 5.11: updated to clarify when VA may recover an incentive payment from a servicer.

In addition, the use of the word “Veteran” was replaced with “borrower” (as loss mitigation is not conditioned on Veteran status), references to the previous VA Home Retention Waterfall in Appendix F were updated to reference the VA Loss Mitigation Waterfall (Waterfall), and technical, non-substantive updates were also made throughout the documents to clarify regulatory and statutory references (for example, references to eligibility were removed in favor of references to qualifications only to reinforce that loss mitigation is not a benefit).

The VA Loss Mitigation Waterfall is available and “live” on June 15, 2026. Full implementation is expected no later than 180 days from the date the final policy is published.

Click to view the VA Manual M26-4 Transmittal Sheet Change 13: https://www.tenaco.com/wp-content/uploads/2026/06/VA-Manual-M26-4-Transmittal-Sheet-Change-13-06-01-26.pdf