That Veterans Affairs Department is offering two new programs for veterans in dire financial straits in connection with the COVID-19 pandemic.
The programs are designed to help VA guaranteed mortgage loan holders get their mortgages up to date and resume regular payments to avoid foreclosure.
While these new programs are offered only as a last resort and in limited circumstances, the VA has several other options to prevent veterans from losing their homes to foreclosures if you don’t qualify for these new, limited-time programs.
Check with the VA or your lender for more details.
Both new programs have requirements and limitations:
- You must currently live in the property,
- You must be up to date with mortgage payments as of March 1, 2020 or less than 30 days past due.
- You must have missed at least one payment after this date.
- You must have a deferral agreement with the lender. Basically, a deferral is a change in the original credit terms or a suspension of payments for reasons of hardship.
- You must have recovered from a financial emergency related to COVID.
- You must not be in default with more than 30% of the property’s appraised value
Applications for the programs are limited. So if you are about to have mortgage payment problems, the best thing to do is to contact your lender or the VA ASAP. The two new programs include:
The VA installment program for accounts receivable
The VA Partial Claim Payment Program is a temporary program that starts on July 27, 2021 and runs through October 28, 2022.
Under this program, the VA makes any past due mortgage payments to the lender and then creates a second mortgage on the property. The second mortgage is interest-free and no payments are due until the veteran has sold the home or paid off the original mortgage. At this point, the VA borrower must repay all funds received under this program to the VA prior to owning the home for free and vacant.
The borrower can repay the money early with no penalty and is exempt from overdue payments that affect their loan or continue to incur interest or penalties.
The COVID-19 reimbursement modification program
The COVID-19 reimbursement change can allow borrowers to reduce their monthly mortgage payments by up to 20%.
As with the Partial Claim Payment Program discussed above, the VA makes any overdue payments to the lender and creates a second mortgage on the property.
However, under this program, the lender is encouraged to modify the existing mortgage to make it easier for the veteran to resume payments.
The lender can change the original mortgage by adding up to 10 years to the repayment schedule; This means that a 30-year mortgage can become a 40-year mortgage.
By adding this extra time to the mortgage and reducing the loan amount, taking into account any payments already made by the borrower – as well as any overdue payments made by the VA under this program – a borrower can achieve a significant reduction in their monthly payments.
For more information, contact your lender or VA loan technician at 877-827-3702.
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