A U.S. Department of Veteran’s Affairs (VA) backed home loan is a benefit of having served in the military. This benefit allows service veterans access to savings, low interest rates, and faster approval from lenders. The VA does not actually issue any loans themselves, they only agree to fund the loan should it fall into default. The holder of a VA home loan must take certain steps if it appears that their loan will default.
The VA requires borrowers to contact them with certain details if a loan is 3 or more payments past due. Since the VA will cover the cost of the loan if the borrower is unable to, it would be fair to notify the VA of the financial hardship one has incurred. The VA will want to know the reasons why the loan has fallen or will fall into default, the employment/financial situation of the borrower, that status of any other occupants of the home, and whether or not the borrower wants to keep their property.
Going through a VA foreclosure is never a pleasant experience, especially if the borrower receives service connected disability or retirement. The veteran that has to live through a VA foreclosure may feel betrayed by their government, but the VA does do what they can to help keep people in their homes. In order to get as much assistance as possible from the VA, be sure to keep them in the loop of the situation. While the lender may eventually contact the VA when a loan has gone into default and it is time to collect, the VA stands a better chance of helping the borrower if they have enough time to plan and prepare for talks with lenders and borrowers.
While the VA won’t represent the borrower in negotiations with the lender, the VA will do what they can to keep from having to lose money by paying the lender. The VA works with lenders and borrowers to come to a mutual solution to the problem of an approaching foreclosure.
The VA offers several alternatives to foreclosure, but one of the most promising appears to be refunding. In this instance, the VA will take over the loan from the lender and will act as the new lender for the borrower. This is the case when a lender states that they cannot offer any more extensions or forbearance. In essence, the original lender is bought out by the VA and an agreement is reached between the VA and the borrower to repay the cost of the loan.
The VA may also be contacted for a list of private and government funded charities that may be able to pay some or all of a delinquent loan amount in order to help a veteran avoid a VA foreclosure, but the VA will never provide direct financial assistance to the borrower.