Assistance provided by the VA
The VA Home Loan Guarantee service provides supplemental servicing, meaning they act as an advocate for the veteran with the lender and assist people to prevent foreclosures. A nationwide staff of 335 distributed amongst 9 regional offices handles all guaranteed loans. The work is distributed nationwide, so the office that assists a veteran is not necessarily located in the same state.
If a veteran anticipates getting behind on their mort- gage payments, or are already delinquent, VA may be able to help.
When a loan goes into default, the veterans’ servicer/ holder is responsible for contacting the veteran, the mortgagor, to determine the reason for the default and attempt to make arrangements to cure the delinquency. If the problem cannot be resolved by the 61st day, the servicer/holder is required to notify VA that the loan is in default. After this notice is received, VA will receive daily information from the servicer about their attempts to cure the default with the veteran borrower. VA will monitor the servicers’ attempts to help the veteran, and will intervene when necessary to help the veteran.
Home Loan
The following are methods of avoiding foreclosure
1. Pay the Delinquency 2. Forbearance and Repayment 3. Payment Assistance
4. Reamortization/Modification 5. Private Sale/short sale 6. Deed in Lieu of Foreclosure 7. Refunding
Pay the Delinquency
Under most circumstances, lenders are required to accept payment of the full delinquency and reinstate the loan. The delinquency may include certain legal costs if you are already in foreclosure. Many lenders require certified funds for reinstatement.
Forbearance and Repayment
The most common way of resolving a loan default is to work out a plan which will let the veteran repay part of the delinquency each month, along with a regular monthly installment. If a veteran is tempo- rarily unable to meet the monthly mortgage obliga- tion, the holder may extend forbearance by agreeing to suspend payments for a limited period of time until the veteran will be able to begin a repayment schedule. VA cannot require the holder to extend forbearance or to agree to a specific repayment schedule; however, holders will usually cooperate so long as the veteran can show that they will be able to resume payments on a specific date in the near future.
Payment Assistance
Many state and local governments, as well as private charitable organizations have programs which will pay all or part of the veterans’ mortgage obligation for a fixed period of time. VA can provide informa- tion on these programs; however, the VA does not have a program that would enable VA to give direct payment assistance.
Reamortization
If a veteran’s loan is reamortized, the delinquency is added to the loan balance in order to bring your
payments up to date. This increases the loan amount and will also increase the monthly payments. The amount of the payment increase will not be as great if the life of the loan is extended at the same time. The loan holder is allowed to extend and/or reamor- tize the loan by VA regulations; however, VA cannot require the holder to do so.
Private Sale
If a veteran does not believe that they will be able to reinstate the loan and cure the default, a private sale of the property will enable the veteran to meet obli- gations and receive any equity that may have built up. Most private sales are for more than the amount owing on the loan. A veteran may sell the property to a buyer who gets his or her own financing and pays off the VA Home Loan or to a buyer who will assume the veterans responsibility for the loan. If the buyer is assuming your loan, the veteran should con- tact VA and obtain a release of liability before the sale is closed. If the property cannot be sold for an amount that is greater than or equal to what the vet- eran owes on the loan, VA may pay a “compromise claim” for the difference in order to help the veteran go through with the sale. The veteran must contact VA to discuss the situation and get prior approval for a sale with a compromise claim payment.
Deed in Lieu of Foreclosure
If a veteran in unable to cure the default, and a pri- vate sale does not appear realistic, VA will consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and VA agrees to accept a deed, the veteran will have to sign legal papers making VA the owner of the property. Normally, VA will have to pay the loan holder a claim for the difference between the value of the property and the amount the veteran owes on the loan. If a deed is accepted, a veteran may be released from all fur- ther liability, or may be asked to agree to repay the Government for all or part of the claim paid.
Refunding
VA has the discretionary authority to buy a loan from the holder and take over the service. This is called “refunding”. The VA considers this alternative for every loan before foreclosure is completed. If the
Home Loan
veteran has the ability to make mortgage payments, or will have the ability to in the future, but the loan holder has decided it cannot extend further forbear- ance or a repayment plan, a veteran may qualify for refunding.