Foreclosure Assistance for Veterans
Is Foreclosure Assistance for Veterans Available?
Foreclosure assistance for veterans is typically available from a number of resources depending upon an individual’s military history and current situation.
For veterans to greatly improve the chances of finding a favorable resolution to foreclosure, individuals must act swiftly to coordinate with his or her mortgage lender and a VA representative.
Resources veterans should consider exploring for potential foreclosure assistance include:
- The Department of Veteran Affairs (VA)
- The Department of Housing and Urban Development (HUD)
- Federally-funded foreclosure assistance programs
- State-funded foreclosure assistance programs
- Local nonprofit HUD-approved housing counseling agencies
- Local foreclosure defense attorneys
Foreclosure Assistance for Veterans from The Department of Veteran Affairs (VA)
The Department of Veteran Affairs (VA) offers several different types of foreclosure assistance for veterans with mortgage loans that have a VA guarantee. The VA guarantees more than 1.8 million home loans for veterans, their families and survivors, according to Andrew Trevayne, Assistant Director for Loan and Property Management, Loan Guaranty Service.
VA Compromise Sale
A VA compromise sale works in a similar way to a short sale in that it strives to help homeowners with underwater mortgages sell their homes.
A homeowner with a VA-guaranteed loan who wants to sell his or her home and currently owes more money on the loan than the home’s fair market value and may benefit by applying for a VA compromise sale.
If the VA approves a homeowner’s application for a compromise sale, then the VA will step in to pay the difference between the outstanding balance on the mortgage loan and the offer to purchase the home.
For the VA to approve a compromise sale application, homeowners are generally required to meet the following eligibility requirements :
- The homeowner must demonstrate a financial hardship
- The home must be sold for a price considered within fair market value according to current market conditions
- There cannot be a second lien on the home (few exceptions may be made in instances where the second lien is considered “insignificant”)
- The closing costs must be considered within a typical range for such a sale
- The government’s cost for the VA compromise sale must be less than if the home fell into foreclosure
- The home’s sale price requires an appraisal from the VA
- The homeowner must explain in a statement the reason for selling the property
VA Deed in Lieu of Foreclosure
A VA deed in lieu of foreclosure often works just like a regular deed in lieu of foreclosure with some additional stipulations.
A deed in lieu of foreclosure typically works by exchanging the title of a home to a mortgage lender in exchange for release from mortgage obligations. The VA may consider a deed in lieu of foreclosure given the following circumstances :
- The homeowner is unable to cure the default
- A private sale of the homeowner’s property does not appear realistic
- There must not be any liens on the property
In most cases, the VA will pay the mortgage lender the difference between the home’s fair market value and the unpaid mortgage balance. If the VA deed in lieu of foreclosure is approved, the homeowner will be required to sign legal papers making the VA the owner of the property.
When this occurs, the homeowner is typically released from mortgage obligations unless they are asked to agree to repaying the Government for all or part of the unpaid mortgage balance paid by the VA.
For more information on foreclosure assistance from the Department of Veterans Affairs, see the Department of Veterans Affairs’ Delinquency Assistance guide.