BVA9500083 
DOCKET NO.  92-23 490     )       DATE
          )
          )

On appeal from the decision of the
Department of Veterans Affairs Regional Office in Chicago,
Illinois

THE ISSUE

Waiver of loan guaranty indebtedness.

REPRESENTATION

Appellant represented by: AMVETS

WITNESS AT HEARING ON APPEAL

Appellant

ATTORNEY FOR THE BOARD

M. J. Bohanan, Associate Counsel

INTRODUCTION

The appellant served from July 1977 to May 1984.

The appeal arises from a February 1992 Decision of the Chicago,
Illinois Department of Veterans Affairs (VARO), Committee on
Waivers and Compromises, which denied the appellant's request for
a waiver of loan guaranty indebtedness in the amount of
$11,904.47.

CONTENTIONS OF APPELLANT ON APPEAL

The appellant contends, in substance, that he was without fault
in the creation of the loan guaranty indebtedness because he was
unable to continue to make the mortgage payments due to financial
hardship resulting from a divorce and that he attempted but was
unable to sell his mobile home.  It is also contended that
repayment would impose financial hardship.

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 veteran's claims files.
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 standard of equity
and good conscience.

FINDINGS OF FACT

1.  In March 1983, the appellant purchased a mobile home with a
loan which was guaranteed, in part, by VA.

2.  Due to increased financial obligations and expenses
associated with his divorce, the appellant was unable to make
mortgage payments.  Mortgage foreclosure proceedings were
initiated.

3.  In January 1990, the mobile home was repossessed by the
lender and sold for an amount less than the unpaid principal
balance, accrued interest, and expenses of foreclosure.

4.  VA paid the lender's loan guaranty claim, and the related
loss to the government in the amount of $11,904.47, was charged
as a debt to the appellant.

5.  The veteran has had a long period of unemployment due to a
job-related injury.

6.  To require recovery of $11,904.11, plus accrued interest,
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. § 5302 (West
1991); 38 C.F.R. §§ 1.964 (1993).

2.  There was no bad faith on the part of the veteran in the
creation of the loan guaranty debt.  38 C.F.R. § 1.965(b)(2)
(1993).

3.  Recovery of the loan guaranty indebtedness of $11,904.47
would be against equity and good conscience.  38 U.S.C.A. § 5302
(West 1991); 38 C.F.R. §§ 1.964, 1.965 (1993).

REASONS AND BASES FOR FINDINGS AND CONCLUSION

The appellant is seeking waiver of recovery of loan guaranty
indebtedness in the amount of $11,407.41, plus accrued interest.
38 U.S.C.A. § 5302(b) (West 1991).

Initially, the Board finds that the appellant has submitted
evidence which is sufficient to justify a belief that his claim is
well grounded.  38 U.S.C.A. § 5107(a) (West 1991) and Murphy v.
Derwinski, 1 Vet.App. 78 (1990).  Furthermore, the Board believes
that this case has been adequately developed for appellate
purposes by VARO and that we may therefore proceed to a
disposition on the merits without the necessity of a remand for
further records.

In the interest of clarity, the Board will first describe the
history of this case.  The Board will then analyze the appellant's
request for waiver of the indebtedness.

The history of the case

In March 1983, the appellant and his spouse financed a mobile
home for $28,800.00, using a mobile home loan which was
guaranteed, in part, by VA.  38 U.S.C.A. §§ 3701 et seq. (West
1991).  The lender retained a security interest in the mobile
home.

In October 1989, the lender notified VARO that the appellant had
not made a payment since September 1989.  The lender noted that
it had contacted the appellant in September 1989 and he was
having financial difficulties.  He claimed that he had been
divorced and was paying $500 per month in child support.  He
indicated that he would attempt to send partial payments.

In January 1990 the lender filed a notice of intention to
foreclose.  The lender notified VARO that the appellant had
contacted them and indicated that he could no longer afford to
make payments.  The mobile home was reported empty in January
1990.  The lender repossessed the home and reportedly took steps
to secure it.

A March 1990 appraisal report valued the home at $16,830.00 "as
is."  However, in June 1990, the lender notified VARO that, as a
result of depreciation and wet weather, the home, "as is", was
worth only $5,750.00.  A second appraisal was performed in June
1990 at the request of VARO, which confirmed further depreciation
as a result of weather conditions.  However, the VA's appraiser
allowed for only a 21 percent depreciation and valued the property
at $13,000.00 "as is."  The mobile home was eventually sold in
November 1990 for $6,750.00.  The lender filed a claim under the
loan guaranty, which was satisfied by the VA for $11,904.47.

The appellant contacted VARO to inquire regarding the loan
guaranty indebtedness.  He claimed that he wanted to "pay it off
so he can apply for a loan, a VA home loan."  VA informed him of
the deficiency total.  The appellant filed a request for waiver of
the indebtedness, on the basis of financial difficulties, and
requested a hearing in October 1991.

At his January 1992 hearing on appeal, the appellant testified
that because of his divorce, he was unable to meet his financial
obligations.  He was paying increased bills and $500.00 per month
in child support.  He claimed that he had put the mobile home on
the market for sale for approximately a year, but had no
inquiries.  He testified that he moved from the home in order for
it to be repossessed.  At the time of his departure, he testified
that there was no water damage and that the home was secure.

A June 1992 financial status report was submitted by the
appellant.  It indicated that he was unemployed and showed a
monthly deficit of $815.75.  He claimed that his household income
was subsidized by his parents.

VARO denied the appellant's request for a waiver in February 1992.
In essence, the Committee on Waivers and Compromises of VARO based
its decision on a finding that, although the appellant was
unemployed, severe permanent hardship was not established and that
the appellant had a potential for many income producing years
ahead.

Analysis

The Board has carefully reviewed the evidence in this case.  With
respect to fault, the evidence demonstrates that the appellant's
divorce was the cause of increased financial burdens.  He
attempted to sell the home without success.  He contacted the
lender and VA so that it could be repossessed, and he vacated the
premises.  The home significantly deteriorated after repossession
by the lender as a result of weather and water damage.  The
appellant was not responsible for such deterioration while the
home was in the exclusive control of the lender.

After having carefully reviewed all of the evidence of record,
the Board believes that the circumstances, especially the
depreciation following repossession, in this case were beyond the
control of the appellant.  Although VARO's position has been
considered, the Board believes that the appellant should receive
the benefit of the doubt with respect to the issue of fault.  In
the Board's opinion, 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
12, 1990 and TG 20-90-2, April 23, 1990.  We also note that due
to a job-related disability, he has sustained long term
unemployment, and that to demand recovery of the debt would cause
financial hardship.

ORDER

Waiver of recovery of loan guaranty indebtedness in the amount of
$11,904.47 plus accrued interest, is granted.

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

          (CONTINUED ON NEXT PAGE)
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.