BVA9504286 
DOCKET NO.  93-03 881     )       DATE
          )
          )

On appeal from the decision of the
Department of Veterans Affairs Regional Office in Denver,
Colorado

THE ISSUE

Waiver of recovery of loan guaranty indebtedness.

REPRESENTATION

Appellant represented by: The American Legion

WITNESS AT HEARING ON APPEAL

Appellant

ATTORNEY FOR THE BOARD

L. M. Barnard, Counsel

INTRODUCTION

The appellant served on active duty from September 1976 to
February 1979.

This appeal arises from a November 1991 decision of the Denver,
Colorado, Department of Veterans (VA), Regional Office (RO),
Committee on Waivers and Compromises, which denied the
appellant's request for a waiver of VA loan guaranty indebtedness
in the amount of $21,245.46, plus accrued interest.  In September
1992, the Committee waived $15,245.46, finding that the appellant
had presented evidence which mitigated his degree of fault in the
creation of the indebtedness.  However, the remaining $6,000 was
not waived.  In January 1993, the appellant testified at a
personal hearing.

CONTENTIONS OF APPELLANT ON APPEAL

The appellant contends, in essence, that he was without fault in
the creation of the loan guaranty indebtedness.  He states that
the debt was incurred after he had to transfer to another state,
and after his wife left him, thus reducing his income.  He
asserts that he did all he could to avoid the indebtedness, by
placing the property on the market, renting it out, and by
requesting a Deed in Lieu of Foreclosure.  Therefore, he states
that the creation of this indebtedness was not his
responsibility.  Moreover, he avers that, if he is found to be at
fault, repayment would cause a financial hardship for his family.

DECISION OF THE BOARD

The Board, in accordance with the provisions of 38 U.S.C.A.
§ 7104 (West 1991), has reviewed and considered all of the
evidence and material of record in the appellant's loan guaranty
folder.  Based on its review of the relevant evidence in this
matter, and for the following reasons and bases, it is the
decision of the Board that the appellant's request for waiver of
loan guaranty indebtedness should be granted, based upon the
principle of equity and good conscience.

FINDINGS OF FACT

1.  In May 1987, the appellant purchased a house using a home
loan which was guaranteed, in part, by VA.

2.  Due to job transfer and a subsequent divorce,  the appellant
defaulted on mortgage payments.  Foreclosure proceedings were
initiated.

3.  In January 1989, the property sold at a foreclosure sale for
an amount less than the unpaid balance, accrued interest, and
expenses of foreclosure.

4.  VA paid the lender's loan guaranty claim, and the related
debt to the government, in the amount of $21,245.46, was charged
to the appellant.

5.  To require recovery of the charged indebtedness from the
appellant would be unfair.

CONCLUSIONS OF LAW

1.  After default, there was a loss of the property which served
as security for the VA guaranteed loan.  38 U.S.C.A. §§ 5107(a),
5302 (West 1991); 38 C.F.R. § 1.964(a) (1993).

2.  Recovery of the loan guaranty indebtedness would be against
equity and good conscience.  38 U.S.C.A. §§ 5107(a), 5302 (West
1991); 38 C.F.R. §§ 1.964(a), 1.965(a) (1993).

REASONS AND BASES FOR FINDINGS AND CONCLUSIONS

The appellant is seeking waiver of recovery of loan guaranty
indebtedness in the amount of $6,000, the amount remaining after
a partial waiver of the original total of $21,245.46.  38
U.S.C.A. § 5302 (West 1991).

Initially, the Board finds that the appellant has presented a
claim supported by evidence which leads to the belief that it is
well grounded.  38 U.S.C.A. § 5107(a) (West 1991) and Murphy v.
Derwinski, 1 Vet.App. 78 (1990).  Furthermore, it is found that
the appellant's claim has been adequately developed for appellate
purposes by the RO and that the undersigned may proceed to a
disposition of the case.

History of the case

A brief chronological history of this case is in order.  The
facts are not in substantial dispute.

In May 1987, the appellant purchased a home in Rifle, Colorado
for $58,000, using a mortgage loan which was guaranteed, in part,
by VA.  38 U.S.C.A. § 3701 et seq. (West 1991).  The property was
secured by a Deed of Trust and a Deed of Trust Note.  The first
mortgage payment was made in July 1987.

In September 1988, the lender notified VA that mortgage payments
had not been made since July 1, 1988.  The Notice of Default
indicated that the appellant had separated from his wife and that
divorce was imminent.  He noted that without her income, he was
unable to afford the mortgage payments.  He then offered a Deed
in Lieu of Foreclosure.  This document also indicated that the
appellant was residing in Utah (as did the Notice of Default).
On a November 1988 Financial Statement, the appellant stated that
he had had the home on the market for the previous nine months,
but that there had been no offers.  In December 1988, VA declined
to accept the appellant's offer of a Deed in Lieu of Foreclosure,
noting that acceptance of same would not be in the best interests
of the government.  It was noted also that the property was
apparently rented at the time.

In December 1988 foreclosure proceedings were initiated.  The
date of the foreclosure sale was set for January 18, 1989.  An
appraisal of the property, conducted in December 1988 in
conjunction with the foreclosure sale, noted that the value of
the property had declined to $46,500.  This depreciation was
primarily due to a 20 percent decline in the region's economy.
The house was occupied at the time of the appraisal and was noted
to be in good repair, with any existent depreciation being normal
for a home of its age and quality.  The property sold at the
foreclosure sale for $41,600.  In April 1989, the lender filed a
claim under the loan guaranty.  In May 1989, VA paid the lender
$21,245.46.

The RO decision

In February 1990, the appellant requested a waiver of the loan
guaranty indebtedness in the amount of $21,245.46.  He noted that
the reasons he defaulted were that he had been transferred to
another state, which necessitated the sale of the property.
However, he was unable to sell the property for over two years.
This inability, coupled with his divorce, led to a situation
where he was trying to maintain mortgage payments in one state
and rental payments in another.  With his now reduced income, he
was unable to keep up with the mortgage payments.  Therefore, he
asserted that he was not at fault in the creation of the
indebtedness.

The appellant's request for a waiver was denied in the November
1991 decision of the Committee on Waivers and Compromises of the
RO.  The Committee found the appellant to be free from fraud,
misrepresentation or bad faith.  However, it was found that he
had presented no evidence of any attempts to avoid the default,
such as contacting the mortgage company or VA, trying to sell the
property, or offering a Deed in Lieu of Foreclosure.  The veteran
then submitted his Notice of Disagreement, which included copies
of the listing contract with a realtor, his offer of a Deed in
Lieu of Foreclosure, and VA's refusal to accept such a Deed, and
a financial status report.  Following the receipt of this
information, the Committee issued a decision in September 1992
which waived $15,245.46, based upon proof of reduced fault on the
part of the appellant.  However, it was noted that an
indebtedness in the amount of $6,000 still existed.

Analysis

A waiver of recovery of a debt may be authorized in a case in
which collection of the debt would be against equity and good
conscience.  38 U.S.C.A. § 5302(b) (West 1991); 38 C.F.R.
§ 1.964(a)(2) (1993).  "Equity and good conscience" involves a
variety of elements.  38 C.F.R. § 1.965(a) (1993).  In essence,
however, "equity and good conscience" means fairness to both the
appellant and to the government.

The Board has carefully reviewed the evidence in this case.  With
respect to fault, the evidence demonstrates that the appellant
was transferred to Utah prior to the default.  Despite this, he
maintained payments on the home until after his separation and
divorce from his wife.  Because of his reduced income, he was
unable to continue payments on the home.  It is also noted that
he attempted to find alternatives to defaulting on his mortgage.
For example, in September 1988, he placed the property on the
market.  Unfortunately, due to economic conditions in the area,
the home did not sell.  In an effort to mitigate any loss to the
government, he also rented the home.  Furthermore, he requested,
but was denied, a Deed in Lieu of Foreclosure.  Clearly, he made
an effort to avoid the default and foreclosure and the subsequent
loss to the government.

After having carefully reviewed all of the evidence of record,
the Board believes that the circumstances in this case were truly
beyond the control of the appellant.

The undersigned believes that the appellant should be given the
benefit of the doubt with respect to the issue of fault.  It is
the finding of the undersigned that the appellant's lack of fault
alone supports waiver of recovery of his loan guaranty
indebtedness.  38 U.S.C.A. § 5107(a) (West 1991); VBA Circular
20-90-5, February 1990 and TG 20-90-2, April 23, 1990.

ORDER

Waiver of recovery of loan guaranty indebtedness is granted.

          KENNETH R. ANDREWS, JR.
          Member, Board of Veterans' Appeals

The Board of Veterans' Appeals Administrative Procedures
Improvement Act, Pub. L. No. 103-271, § 6, 108 Stat. 740, ___
(1994), permits a proceeding instituted before the Board to be
assigned to an individual member of the Board for a
determination.  This proceeding has been assigned to an
individual member of the Board.

NOTICE OF APPELLATE RIGHTS:  Under 38 U.S.C.A. § 7266 (West
1991), a decision of the Board of Veterans' Appeals granting less
than the complete benefit, or benefits, sought on appeal is
appealable to the United States Court of Veterans Appeals within
120 days from the date of mailing of notice of the decision,
provided that a Notice of Disagreement concerning an issue which
was before the Board was filed with the agency of original
jurisdiction on or after November 18, 1988.  Veterans' Judicial
Review Act, Pub. L. No. 100-687, § 402 (1988).  The date which
appears on the face of this decision constitutes the date of
mailing and the copy of this decision which you have received is
your notice of the action taken on your appeal by the Board of
Veterans' Appeals.