The Department of Veterans Affairs (VA) has announced a significant measure to support military borrowers facing potential foreclosure on homes financed with VA loans. Here’s what you need to know about this recent development and how it impacts VA loan borrowers.
The Veterans Assistance Partial Claim Payment program, initiated in July 2021, provided a lifeline for military borrowers during the COVID-19 pandemic. This program allowed eligible borrowers to defer six or 12 mortgage payments if they encountered financial hardships. The missed payments would then be added to the end of the loan term, easing the immediate financial burden for borrowers.
However, despite industry appeals, the VA discontinued this program in October 2022, leaving many borrowers scrambling to repay the deferred amounts or explore refinancing options with potentially higher interest rates.
Responding to mounting concerns, the VA has decided to implement a foreclosure pause on VA-guaranteed loans, effective until May 31, 2024. This decision aims to alleviate the pressure on thousands of VA loan borrowers who faced the risk of losing their homes after the expiration of the assistance program.
An investigative NPR article shed light on the precarious situation faced by VA loan borrowers, revealing that approximately 6,000 borrowers with VA loans are currently in the foreclosure process, with an additional 34,000 delinquent on their payments.
To address these challenges, the VA has extended the COVID-19 Refund Modification program through May 31, offering relief to borrowers who have not fully recovered financially from the pandemic. This program enables eligible military borrowers to receive a zero-interest, deferred-payment loan from the VA to cover missed payments and modify their existing VA loans for more manageable monthly payments.
Additionally, the VA plans to introduce the VA Servicing Purchase (VASP) program, allowing the VA to purchase defaulted VA loans from mortgage servicers. This initiative will enable federal officials to modify these loans and include them in the VA-owned portfolio as direct loans, providing further assistance to struggling borrowers.
The National Consumer Law Center has welcomed the VA’s decision, emphasizing the importance of the foreclosure pause in providing VA borrowers with a crucial opportunity to access the VASP program and explore alternatives to foreclosure.
In response to these developments, a group of Democrat U.S. Senators has urged VA Secretary Denis McDonough to take action to protect military borrowers from foreclosure. The senators highlighted the urgent need for viable solutions to help veterans bring their mortgages current and avoid the devastating consequences of foreclosure.
Despite the challenges posed by the ongoing pandemic, the VA remains committed to supporting military borrowers and their families. Over the past year, the department has assisted more than 145,000 military borrowers in keeping their homes and avoiding foreclosure, underscoring its dedication to serving those who have served our nation.
The Department of Veterans Affairs (VA) offers comprehensive assistance to help veterans avoid foreclosure and maintain homeownership. Here’s what you need to know about the VA’s initiatives and resources available to support veterans facing financial challenges with their VA-guaranteed home loans.
Foreclosure can be a daunting prospect for homeowners who fall behind on their mortgage payments. To address this issue, the VA has implemented measures to provide relief and support to veterans at risk of foreclosure on their VA-guaranteed loans.
The VA is actively engaging with mortgage servicers to enact a foreclosure pause on VA-backed home loans until May 31, 2024. During this temporary pause, the VA will collaborate with servicers to explore solutions that enable veterans and survivors to retain their homes and avoid foreclosure.
The COVID-19 Refund Modification program, extended through May 31, 2024, offers vital assistance to veterans and their families impacted by the pandemic. Through this program, the VA facilitates the purchase of a portion of the loan, providing veterans with a zero-interest second mortgage.
Concurrently, mortgage servicers modify the existing loan to ensure affordability, although it’s important to note that modified payment amounts may increase due to rising interest rates.
Veterans experiencing financial difficulties can access counseling services from the VA, regardless of whether their loan is VA-guaranteed. Additionally, veterans with VA-guaranteed loans that are 61 days past due will automatically be assigned a VA loan technician to review their loan and provide personalized assistance.
For veterans struggling to make mortgage payments, prompt communication with their loan servicer is crucial. Servicers are committed to collaborating with veterans to explore viable solutions tailored to their individual circumstances.
In instances where foreclosure becomes unavoidable, the VA offers guidance on potential alternatives to foreclosure. These include repayment plans, special forbearance options, loan modifications, extra time to arrange a private sale, short sales, and deeds in lieu of foreclosure. Each option is designed to provide veterans with alternatives that align with their financial situation and homeownership goals.
It’s important for veterans to be vigilant against potential scams and work only with trusted organizations when seeking assistance with their mortgage payments. The VA remains dedicated to supporting veterans throughout their homeownership journey and encourages veterans to reach out for assistance and guidance as needed.
In the event of foreclosure, short sale, or deed in lieu of foreclosure, veterans may be required to repay the amount lost on their loan to restore their future home loan benefit through a process known as “restoration of entitlement.” Veterans can contact a VA loan technician for more information on this process.
For additional support and information, veterans can explore resources such as housing counselors, HUD’s homeowner’s guide to success, consumer advisories from the Consumer Financial Protection Bureau (CFPB), and programs like the Homeowner Assistance Fund (HAF) and the Veterans Benefits Banking Program (VBBP) for financial counseling and consultation.
The VA remains committed to providing comprehensive assistance and resources to help veterans navigate financial challenges and maintain stable homeownership. For assistance visit VA help to avoid foreclosure.